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Reducing Holiday Debt

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Q: We enjoy making the most out of the holidays, but are tired of the debt and interest that show up come January. Do you have any ideas for what we can do starting now to reduce or eliminate holiday debt, while still creating the holiday we dream of

A: You are smart to think of this now. According to a 2015 research study by Gallup, Americans said they planned on spending an average of about $830 on Christmas last year. That is a large chunk of money out of the family budget. There is still time to plan, save up and reduce the likelihood of accruing a huge holiday debt.

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First, look at your holiday budget from last year. How much did you spend? Do you want to spend the same amount, less or maybe more? Once you have that amount, let’s find a way to budget for the expenses. There are about 12 weeks between Oct. 1 and Christmas. Divide your planned amount by 12, and see if you can save that amount weekly. For example, if you plan to spend $600, divide that by 12, and put aside that amount weekly, in this case, $50 weekly from now until Christmas.

If that seems daunting, do what you are comfortable with to save up—can you eliminate that daily Starbucks? Pack a lunch or make dinner at home instead of eating out? Cut out unnecessary parts of cell phone or cable plans? Every little bit counts!

Realizing the effort it takes to save the amount you spend at the holidays may make each purchase a bit more precious. It may even inspire you to look for ways to spend less and be more thoughtful with what you do buy.

With less debt to pay off at the beginning of the New Year, your holiday saving (and spending) plan can extend over 12 months instead of 12 weeks. Saving may require some discipline and stealth money management, but just imagine the magical feeling of starting 2017 with little or no holiday debt!

Rachel Namoff is a managing member of Arapaho Asset Management in Denver.

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