4 tips for avoiding debt during the holidays

But there’s one memory you don’t need: Credit card bills reminding you that you overspent on the holidays to compensate for a lousy year.

You aren’t alone — as a result of COVID-19, 40% of consumers said they’ll “buy more gifts to bring joy during challenging times,” according to a survey from The NPD Group, a marketing research company.

But overspending on a little joy now can leave you with greater misery as you dig yourself out of debt. So we have tips to help you avoid overspending this holiday season.

It’s easy to get caught up in the spirit of the season — especially if you haven’t had a lot to celebrate this year. Check out these tips to help ensure you aren’t still paying off 2020 purchases long after this year has passed.

1. Follow the four-gift rule

Instead of filling the room (and maybe the next) with presents, consider the four-gift rule. It’s a strategy that sets clear boundaries on what types of gifts to get and caps how much you buy, so you don’t go overboard on Christmas spending.

The rule even rhymes, so it’s easy to remember:

Something they want

Something they need

Something to wear

Something to read

It’s a great family tradition to adopt if you want to reduce the financial stress of the holiday season.

2. Find toys for under $25

The littlest people to shop for can be the biggest source of gift-giving stress.

You want to impress the kiddos with the coolest toys of the season, but spending over $100 on one gift for one child can leave you with debt you’ll be paying off well into 2021.

Don’t worry though. There’s still opportunity to land an awesome gift without overspending. We rounded up the hottest toys of 2020 — each for less than $25.

3. Avoid boredom buying

Maybe you don’t necessarily have a long list of gifts to buy.

But, you know what it’s like when it’s the holidays, and you’re stuck inside with nothing but time on your hands. Out of boredom, you scroll through a couple of your favorite stores’ sites… and three hours later, you can’t remember if you fed the cat, but you somehow spent a week’s worth of grocery money on closet organizers. (Or is that just us?)

You’ve just engaged in retail therapy: That’s when you shop to cheer yourself up or stave off boredom.

The euphoria of scoring a sweet deal on a purchase can be short lived, though, when you open next month’s credit card bill. Check out these tips for how to avoid using retail therapy to get you through the holidays.

4. Stick to a holiday budget

It’s not too late to set spending limits for this holiday season — especially if you’re one of those last-minute shoppers. (Guiltily raises hand).

Before figuring out what you should spend your money on, it’s essential to figure out how much money you can spend. And that means establishing a budget.

If you set aside an hour to review your numbers and create a holiday budget, you’ll be able to sustain that holiday cheer (and a little more cash) long into the new year.

Whichever holiday budgeting method you choose, having the information at your fingertips will help you stick to your spending limit and avoid impulse buying.

And wrapping up the holidays without taking on extra debt is a very merry way to start 2021.

Tiffany Wendeln Connors is a staff writer/editor at The Penny Hoarder. Catch her on Twitter @TiffanyWendeln.

This was originally published on The Penny Hoarder, a personal finance website that empowers millions of readers nationwide to make smart decisions with their money through actionable and inspirational advice, and resources about how to make, save and manage money.