In today's economic environment, credit purchases can cost double the original purchase price and take years to pay off completely, according to Ron Hatfield, former family financial specialist with West Virginia University Extension Service.
With the holidays approaching and the economy struggling, it's more critical than ever for you to budget your money, monitor your spending, and avoid credit card debt.
Under the pressure of today's financial crunch, Hatfield says, more consumers may be tempted to rely on credit cards, but that could be a dangerous choice.
It's easy to get caught up in the moment, which is how many consumers get into trouble. People often have good intentions of paying off credit card charges at the end of each month, but because of a variety of circumstances, most don't.
Hatfield advises families to make and follow a plan:
- Pay cash for fast food, gas, and anything that will be gone before it's paid off.
- Set your spending limits. Track your actual spending by using only one credit card, maintaining a spending log, and keeping all your receipts in one place.
- Make a list of all the things you are likely to spend money on. Include, not only gifts, but also such items as decorations, cards, stamps, special food, and clothes.
- Then determine how much money you have available to spend and the approximate cost of the items on your list. If the estimated cost calls for more money than you have available to spend, look for items you can remove from your list.
- Have a specific amount of cash in hand and do not withdraw more money when that cash is gone.
After creating a holiday budget, Hatfield says, it's important to stick to it.
Although you may find it difficult to stick to your plan during the holidays, it may be helpful to think about what overspending could do to you and your family in the long run, Hatfield says.
To cut costs, your family could draw names for a gift exchange, rather than each member buying a gift for everyone.
Finally, families can focus on ways to celebrate the holidays that cost very little or nothing. You can find many ways to celebrate beyond buying gifts.
Spending quality time together doing activities that everyone enjoys could be the best gift your family receives this holiday season.
Another gift may be turning these holiday budgeting steps into year-round habits.