Understandably, millions of Americans go into debt during the holidays. According to Discover, “in 2016 the average American went more than $1,000 into debt just during the holidays alone.” Since we’re in the middle of the holiday season and Christmas is around the corner, we thought we’d dedicate a post to staying out of debt during the holidays.
One of the main reasons why Americans go into debt is holiday spending. “Nearly half of Americans will take four months or more to pay off all that debt, with nearly 12% opting to make only the minimum monthly payment,” according to Discover.
What does this mean for debtors? It means it can take them years to pay off their debt, and considering the heavy interest payments, that money would be better spent on savings, a family vacation, college, or retirement!
How Can I Avoid Going into Debt?
We thought Discover had a great solution for avoiding holiday debt: If you were in over your head last year, what you can do is take a look at your credit card statements and see how much you put on credit during the holidays. Take that number and divide it by 12. That’s how much you need to save each month for next year’s holiday season.
If you spent $1,000 or $2,000 last year, it doesn’t necessarily mean that you spent too much. It could just mean that you failed to budget. For example, if you’d like to spend $1,500 on next Christmas, you’re going to need to save $125.00 a month between January and December. If that’s more than you can afford, think, are there other places you can cut back? For example, do you really need that daily $5.00 cup of Starbucks coffee? Or, do you really need to spend $50 or $100 a week eating out?
If you did end up putting holiday purchases on credit cards this year, we recommend taking advantage of balance transfer offers on new or existing cards. For example, you may be able to transfer a balance on an 18% interest card and get 0% interest on the balance transfer for 0 to 18 months with a 3% transfer fee.