Despite the fact that American shoppers tend to map out their purchases well before the holiday season kicks into full gear, most consumers still will wind up with a pile of debt by the time they’re done making purchases. According to NerdWallet’s second Consumer Holiday Shopping Report, 56% of shoppers wound up adding to their debt load during the 2016 holidays. And unfortunately, it looks like they’ll be repeating that mistake this year.
While the average shopper spent $657 last holiday season, this year, the typical consumer will plunk down $660 on gifts and the like. But since many Americans aren’t in a better financial position this year as compared to last, those who racked up debt in 2016 are likely to do the same this year if they’re not expecting to lower their spending.
Furthermore, while setting a holiday shopping budget can help consumers keep their spending in check, it’s not always a tactic that works. A good 24% of shoppers went over their budgets last year despite taking the time to put them together. And in a separate Coinstar report, 77% of consumers admitted that, while they’ll be setting budgets this year, they’re also expecting to exceed them.
If you’re likely to overspend this year, you should know that doing so could land you in major debt. Obviously, the higher an interest rate your card charges, the more you’ll end up spending if you can’t pay off your holiday haul in full right away. But more than that, carrying a hefty balance too long can actually hurt your credit. That’s because any time you use more than 30% of your available credit line, you send your credit utilization ratio into unfavorable territory, and that’s a key factor in establishing your score.
Since racking up loads of debt is hardly a sensible way to go into the new year, a better approach is to limit your spending and take steps to avoid hurting your finances. Here are just a few ways to be a smarter shopper this year.
1. Set a realistic budget and stick to it
Your holiday budget won’t do you much good if you’re unwilling to follow it. If you’re going to take the time to create a budget, figure out how much you can comfortably afford to spend, and pledge to stay within that limit. And by “comfortably,” we’re talking about an amount you’ll manage to pay off immediately, and one that doesn’t cause you to fall short on your other bills.
2. Research the sales — but don’t get lured in by them
Retailers tend to play it somewhat fast and loose with the word “sale” during the holidays, so the best way to know whether you’re really getting a good deal or not is to research each big-ticket item extensively that you’re looking to buy. Furthermore, make sure you’re looking at true apples-to-apples comparisons. It’s often the case that retailers will have a certain item on sale for a lower price, but when you scope out its specs, you’ll see that it’s a different version of the product you initially put on your list.
Once you figure out where to get the best price per item, visit those retailers at the appropriate times and buy only those items. This cannot be stressed enough. If you show up and the product you want is out of stock, move on without buying something else. Some shoppers feel compelled to justify the trips they make by buying things they don’t need, or even particularly want, when the items they originally intended to buy aren’t available. That’s a mistake. Buying something random because it’s on sale won’t end up saving you money. Rather, it’ll end up costing you money, and for no good reason.
3. Leave your credit cards at home
There are plenty of reasons to shop with a credit card this holiday season, from purchase protection to cash-back rewards. But if you can’t trust yourself to keep your spending in check, then you’re better off hitting the shops with cash alone. Specifically, when you go out to purchase things from your list, bring only enough cash with you to cover those items. This way, you’ll eliminate the temptation to charge extra purchases.
If you are going to shop with a credit card, make sure your grand total for the season is a number you can pay off before interest starts to accrue on your account. There are plenty of opportunities to work a side hustle around the holidays and generate extra cash, so if you’re iffy about paying off your bill on time, work a couple of weekends in late November or December to compensate for your potential shortfall.
The holidays are supposed to be a time of joy, not debt. Be smart about how you shop this year, and with any luck, you’ll enter 2018 with a clean financial slate.