Over one-third of the working adults in our country get into debt each year to cover the cost of Christmas. Those surveyed admitted to using credit cards and buy-now-pay-later programs to pay for holiday’s gifts, travel, and food, averaging around $1500. Some had yet to get out from under the debt they incurred the Christmas before. NPR’s Asma Khalid spoke with Matt Shultz, the chief
credit analyst for Lending Tree, who said this trend involves the wealthy as well as those struggling financially.
People spend money during the holidays because it brings them joy. Wealthy people have more credit and can incur more debt, but most use debt as a tool. When someone with a higher income uses a credit card to pay for an item or a trip, it’s likely because the credit card offers some type of reward. Otherwise, they could pay cash. An individual who can’t afford to pay for holiday travel and presents without using credit cards, likely has the best intention to pay off debt in the new year but doesn’t have a plan in place to do so.
Creating a spending plan and a savings plan will help you get out of debt and afford to pay for the things you want when you want them, but you have to put in the work first. A spending plan helps you learn where your money is going, what monthly payments are essential, and what payments are unnecessary. Once you reduce monthly spending, you’ll free up money to tackle debt while saving towards Christmas, or a family vacation, a new car, etc. Once monthly expenses are reduced, choose the credit card with the lowest amount to pay off first by making larger payments towards the balance each month. Make minimum monthly payments on the other credit card balances until one card is paid off, and then move on to the next lowest card, and so on.
A savings plan, like a spending plan, tracks income and expenses and helps you set your savings goal and timeline, so you’ll know how much you need to save each month to reach your goal. Once you have begun saving money consistently every month, avoiding unplanned splurges and dipping into your savings account will help you be successful. Whenever you have questions about finances, don’t hesitate to reach out. 800-689-3935