How to prevent holiday debt from ruining your financial goals

Lacking a strategy can leave you vulnerable to overspending

It is easy to overspend during the holiday season and rack up debt. Alamy
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Factoring holiday expenses into your budget all year long is effective for avoiding debt, but it is not always feasible with a limited budget or unforeseen expenses.

When that is the case, lacking a strategy for holiday spending can leave you vulnerable to debt and overspending that delays financial goals. But it is not too late to come up with a last-minute plan to save money for the holidays.

The small end-of-the-year window can offer some time to make money moves to prevent digging yourself into a holiday debt hole.

Align your holiday budget with financial goals

When determining how much to spend over the holidays, begin with your budget, says Jason Speciner, a certified financial planner at Financial Planning Fort Collins.

“Start with how much money you are willing to spend – and able to spend – on gift giving and then work your list into that,” he says. “Do not put the cart before the horse and end up overspending because you have put dozens of people on your gift list.”

If your debt or budget leaves no room for holiday expenses, plan to spend time with people through free holiday activities, make gifts or save with a secret gift exchange. Set expectations early by alerting people to your plans.

Adding to the debt pile during the holidays gets expensive and takes longer to pay off. Strategise how you will pay off any debt and prioritise high-interest debt first.

With good credit, a balance transfer credit card lets you move debt from a high-interest credit card to one with a lower interest rate. Without interest, your monthly payments are applied directly to your balance, reducing the time it takes to pay off debt.

Start with how much money you are willing to spend – and able to spend – on gift giving and then work your [holiday] list into that
Jason Speciner, financial planner

Use the bonus-friendly season

If you are debt-free and planning to obtain a new credit card, look for one with a sign-up bonus that can offer additional cash or rewards to defray holiday expenses.

Sign-up bonuses usually offer a three-month window to meet spending requirements, and they can be easier to reach if you are charging everyday and holiday expenses.

Earn rewards with cash-back apps

A cash-back app can earn additional value on everyday purchases. It may require uploading receipts but for Krystal Sharp, coupon coach and creator of the blog Krys the Maximiser, it is worth the effort.

She uses various apps to earn cash back or gift cards. These apps let you add offers in-store or online from certain retailers and earn cash back on eligible items purchased.

Or you can upload a receipt to redeem certain offers. You may also earn incentives for referring other people. For more value, Ms Sharp uses a rewards credit card to make purchases and stack earnings.

“I am trying to focus a lot on how can I earn gift cards, how can I get referrals, how can I save enough at the store and use my store rewards to buy things we need for the holidays,” she says.

Save with a ‘no-spend challenge’

A foolproof way to save is to refrain from making unnecessary purchases over a certain period of time. You can try a no-spend month, no-spend weeks or no-spend weekends, depending on your preference. The money saved can offset potential costs during the holidays.

For Courtney Clarke, a New York-based content creator at TheLifeOfCo YouTube channel, a “no-spend November” helped her stay on track with her debt goals in 2020. For a month, she spent only on essentials, avoiding eating out and activities that cost money.

“I definitely cannot say that I was perfect in the matter but it is just a nice reset to retrain your brain,” says Ms Clarke. “It is just making sure that you are attempting to get the best out of it.”

She admits spending on eating out when there was not enough time to prepare a meal but even after straying occasionally, she still saved more than $300 that month.

Start a side hustle

Earn money towards the holidays by picking up a side job now or decluttering your home. When it comes to gig work, there are many flexible side jobs to do in your spare time. Or, if you prefer to save time, sell those dust-gathering items in your wardrobe.


Updated: October 20, 2021, 4:00 AM