A plan now will avoid winter holiday debt


Avoid winter holiday debt by planning now Juan Rodriguez/


Avoid winter holiday debt by planning now Juan Rodriguez/


You may be thinking more of summer barbecues than Christmas lights or flickering menorahs, but if you’d like to avoid racking up winter holiday debt, you can start taking steps now to avoid the January credit-statement blues.

A bit of summertime planning, saving, budgeting and targeted early shopping can go a long way toward making for a more peaceful, relaxed and financially sound winter holiday season.

“It’s crazy for people to go into debt for things like Christmas. It’s here and gone and you’re paying for it for the next five years,” says Colorado frugality blogger Tawra Kellam, who runs the Living on a Dime website.

“We never, ever, ever go into debt for holidays or birthdays or anything like that. We made a decision not to do it and we just don’t,” she says.

Jason Vitug, owner of the Phroogal website, notes the emotional benefits of avoiding holiday debt and last-minute shopping. “The holidays are a time to enjoy the company of your loved ones, and what a better way to do that than sitting at home, having conversations over dinner rather than running around at the malls or frantically shopping online to find something to arrive on time,” Vitug, author of “You Only Live Once: The Roadmap to Financial Wellness and a Purposeful Life,” tells

Here are some moves you can make this summer and early fall for merrier winter gift giving.

Make a list, budget nice
“Make a list of the individuals who you are planning to give a gift for the holiday season. Creating a list helps you plan,” Vitug says. “Set a realistic budget in terms of how much you’re planning to spend for the holidays.”

Setting the budget today will give you enough time to start saving money from every paycheck. A budget that’s realistic and reflects your financial situation should give you confidence and help you resist marketing pressures to spend bigger at the holidays, he says.

It’s crazy for people to go into debt for things like Christmas. It’s here and gone and you’re paying for it for the next five years.

— Tawra Kellam
Blogger, Living on a Dime

If you have a $500 budget and you’re giving to five people, he notes, “that gives you the flexibility to say, `I can spend $100 per person.’” But that doesn’t mean you have to spend that whole amount.

Kellam, a bargain shopper who has five children and buys them toys only for their birthdays and holidays, says her gift budgets represent the value of the item, not necessarily its actual cost. For her son’s seventh birthday, Kellam recently purchased a new scooter worth $25 for only $5 at a yard sale.

Bruce McClary, spokesman for the nonprofit National Foundation for Credit Counseling, suggests checking your financial resources before planning holiday shopping. “Check savings to see how much can be reserved for the holidays,” he says. “If planning to use credit, review your balances and credit limits to avoid going over the assigned limits or charging more than you can afford to repay.”

Limiting your spending doesn’t mean you won’t be able to give to those you care for, he notes. “There are so many free and affordable ways to give, and often the least costly gifts are the ones that people value the most,” McClary says.

Homemade or baked gifts, or a personalized coupon good for a night of your baby-sitting services, are among the ways you can give without debt. There are several other strategies as well.

Sale away – off-season
If you’re willing to shop months early, you may find great gift bargains. “We shop all year long,” says Kellam, who was able to pick up for $1 some bath products previously priced at $10 each. She’ll buy new or near-new items at discount, put them in a basket and give it to an adult family member, spending maybe $5 on $50 worth of goods.

For young kids, toys don’t have to be new or in original packaging, notes Kellam, who collects good-as-new Legos for her son throughout the year. “We’ll have a nice big box of Legos by the time Christmas comes around,” she says. “Until kids are about 7 or 8, they don’t even notice if the Legos are in the same package.”

End-of-summer specials and non-Christmas holiday sales can be better than Black Friday for certain items, according to Vitug. Check out back-to-school, Labor Day and, later, Veterans Day sales, he says. You may find that clothing, jewelry, electronic gadgets, book bags, perfumes and cosmetics are less expensive in summer or early fall than on Black Friday, and come without the Christmas-shopping frenzy, he says.

Laptops and other school-related items are likely to be lower priced during back-to-school sales than during the winter holiday shopping season, and televisions may be drastically reduced during the summer, Vitug says.

He has found that before Labor Day weekend, stores try to sell older TV models before they get the new ones for the holiday season. Those older models may not be much older than the new ones and not very different.

If you do wait until the last minute to shop, you may find good deals the week before Christmas, according to Kellam. For the past several years, she’s noticed that merchants desperate to get rid of inventory have sales then. She now buys about half of her gifts the week before the holiday, when previously she had completed 90 percent of her shopping before Thanksgiving.

Squirrel away holiday funds
“If you don’t want to buy your gifts all year, be sure to save up all year,” says Kellam. That means putting $80 in an envelope every month if you want to spend $1,000 at Christmas, for example.

In fact, Vitug says, it’s not too early to start saving for Christmas 2017. Saving $10 or $20 per paycheck adds up, and you avoid the pressure of trying to find holiday money in December. “That will give you enough time to amass a good amount of money,” he says.

Close your eyes and imagine how happy, satisfied, or proud you will feel to not have any credit card debt.

— Rick Kahler
Certified financial planner

Some banks and credit unions offer “Christmas club” accounts that allow you to save all year and don’t let you withdraw the money until the fall, in time for holiday shopping, he notes. “The whole goal is that you’re not spending it mindlessly,” Vitug says. Don’t expect to earn much, if any, interest on a Christmas club savings account, however.

South Dakota financial planner Rick Kahler offers a simple savings formula: “Set the amount you want to hold your holiday spending to and then divide that by the number of months left to shop. Deposit that amount in a savings account you vow not to raid for any reason until it’s time to buy gifts. Make the deposit to that account after paying your monthly ‘have-to’s’ but before all ‘wants,’” he says.

Saving for holiday gifts and travel might mean cutting back on summer spending, but that doesn’t mean eliminating summer fun, as there are plenty of free and low-cost activities for kids and adults alike. “Spending is all about choices, and what makes sense based on affordability,” notes the NFCC’s McClary.

Zero-rate or rewards cards
Avoiding credit cards altogether may take a big adjustment for those used to relying on debt for gifts and travel, McClary notes. “This is especially true if there isn’t enough savings to maintain the level of spending that was supported by credit cards,” he says.

You may be tempted to use a 0-percent introductory rate credit card for your holiday shopping, but be careful. If you don’t pay off the entire balance before the promotional period ends, you could end up spending more than you would on a good low-rate card.

There are other ways to use credit cards wisely for holiday shopping and travel, if you’re careful not to burden yourself with new debt. You might put rewards from a cash-back card into a Christmas savings account or use reward points for gifts or holiday travel.

Even if you don’t have a stash of points to use to buy things, shopping with a rewards card and using rewards portals can help you receive a little something even as you give. Be careful, however, to pay off your balance in full every month or the interest you’ll pay will negate any rewards earnings.

While avoiding holiday debt may take a little effort, it helps to focus on the rewards of financial self-discipline. Kahler offers this advice: “Close your eyes and imagine how happy, satisfied, or proud you will feel to not have any credit card debt by having saved ahead of time.”

See related: Got holiday debt? Compare balance transfer, personal loan, Card-linked offers: Shopping deals you're not aware of, 5 things to do now to avoid holiday debt

Published: July 6, 2016

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Updated: 10-22-2016

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