Episode: 363 - Top 5 Simple Steps to Avoiding Holiday Debt This Year
Find Hidden Money https://www.debtfreedad.com/find-your-first-$100-workshop
As summer blazes on, the holidays might seem far off, but if you're not careful, they can sneak up on you and wreak havoc on your finances. If you're tired of starting the new year with a financial hangover from holiday overspending, this guide is for you. Here are five straightforward steps you can implement now to enjoy the holiday season without going into debt.
1. Set Your Holiday Budget Today
It's never too early to start planning. Begin by setting a realistic holiday budget that details how much you intend to spend on gifts, decorations, travel, and meals. Decide on a spending limit for each person you plan to shop for. Whether your total is $100, $500, or $1,000, writing it down transforms this number into your spending target and personal guardrail. Remember, budgeting is not about restriction; it's about being intentional and in control.
2. Start a Holiday Sinking Fund
A sinking fund is a designated savings account for an upcoming expense. By starting now, you can spread out the financial burden over several months. For example, if your holiday budget is $600 and the holidays are five months away, aim to save $120 per month or approximately $30 per week. Not only does this approach make it easier to gather the funds, but it also alleviates the last-minute financial scramble. Consider using a high-yield savings account to earn some interest on your savings.
3. Reevaluate Your Gift List
Generosity doesn't have to equal financial strain. Reflect on whom you really want to purchase gifts for and consider alternatives like family gift exchanges, spending limits, or experiential gifts. Ask yourself: Are you buying gifts out of obligation? Your financial peace matters too, so have these conversations now to prevent overspending later.
4. Track Your Spending
Tracking your expenditures is crucial. A simple note on your phone or a notebook can suffice—jot down every gift, meal, and decoration purchase. This real-time awareness will help you stick to your budget and avoid overspending. Tracking your spending should be a habit, not just during the holidays but all year round.
5. Avoid Last-Minute Panic Spending
Avoid the holiday shopping chaos by starting early. With a funded sinking account, you can take advantage of sales throughout the year, purchasing gifts gradually before the holiday rush. This preparation allows you to relax and enjoy the season when December arrives, rather than stress over last-minute shopping.
Conclusion
The holidays should be a time of joy and celebration, not financial stress. A little planning now can significantly reduce stress later. If you're struggling to find extra money to start your holiday fund, look for ways to cut costs in your daily budget. Preparing now ensures you enter the new year free from the burden of holiday debt.
Resources Mentioned
The Totally Awesome Debt Freedom Planner https://www.debtfreedad.com/planner
To learn how to take the stress out of your finances so you can breathe again, follow this link: https://www.debtfreedad.com/lwp-masterclass-opt-in-page-podcast
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Transcript
Brad Nelson:
Now the holidays might feel far away, being it's the middle of summer, but if you're not careful, they're going to sneak up on you and wreck your finances, just like they did last year. Now, in this quick but powerful episode, I'm going to be sharing some real numbers from the 2024 holiday shopping season that are going to shock you and five simple, practical things that you can start doing right now to avoid going into debt this holiday season. And if you've been tired of that holiday spending hangover rolling into January and your new year, this episode is for you. Hey guys, welcome to today's show. My name is Brad Nelson, founder of Debt Free Debt. I paid off about $45,000 in debt and I've been debt free now for more than 12 years. I've also been fortunate to help thousands of other people save and pay off tens of millions of dollars with the work that we do here at Deferredad.
Brad Nelson:
Now I get it. Like I said in the introduction, I know it's the middle of summer as this episode airs, but today's episode, I'm hoping, is your friendly wake-up call, because the holidays are going to be here before you know it. And I get it right, you don't even want to think about the holidays, right? You're enjoying your summer, as am I, and you're not looking forward. Especially if you live in the northern part of the United States or if you're tuning in from someplace that gets cold during the winter, the holidays are the last thing you want to think about right now. Right, and for a lot of people, though, the holidays means two things fun, but fun with debt.
Brad Nelson:
Every year, millions of people wake up in January stressed out, they're overwhelmed and they're buried under a new pile of holiday debt. And, the saddest part, it doesn't have to be that way. Let me hit you up with some real numbers from this past year that should hopefully set off some alarm bells for you and get you to sit up straight and be like maybe we need to think about the holidays this year, because during the 2024 holiday season, 36% of Americans took on new debt just to pay for gifts, decorations, meals and travel. The average debt a person took on was $1,181. And here's the scary part, you guys. Twenty one percent of those people said it was going to take them at least five months or more to be able to pay that holiday debt off. And, even worse, 20 percent of the people are only making minimum payments, which means that they're paying high interest and staying in debt for a long time to come just to afford one holiday shopping season. In fact, 42% of that holiday debt was charged at the interest rates of 20% or higher. And think about that. You buy gifts in December and by the next December you're still paying for them and paying hundreds of dollars extra in interest just for the privilege of borrowing that money. Dollars extra in interest just for the privilege of borrowing that money. And here's what's really shocking me no-transcript. That's right. They're racking up holiday debt on top of holiday debt. Let that sink in a little bit, right?
Brad Nelson:
So let's dive into five simple things that you can do right now to enjoy your holidays and skip that holiday financial stress and debt. Number one right now set your holiday budget today. Start thinking about what you're going to spend right now. This step is super simple. Thinking about what you're going to spend right now. This step is super simple. It's easy to ignore as well, right, but it can be powerful. Decide just how much you're going to spend on each person before standing in the store, feeling that pressure, being tempted by all of the advertising and the hype to get you to spend more money. So think about that. What's your number? Maybe it's $500. Maybe it's a thousand, maybe it's a hundred dollars. Pick your number and write it down. This becomes your spending target and your personal guardrail and remember this budget, the holiday budget, it's not about restriction, right? It's not about being cheap and not being able to have fun. It's about being intentional and being in control. It's about knowing what's realistic for you so you don't wake up in January regretting every swipe of your credit card or wondering how the heck you're going to pay off some of those things already dealing with a lot of financial stress outside of that holiday spending.
Brad Nelson:
Number two start a holiday sinking fund. I love this right, and especially because we're listening to this episode early. The holiday shopping season is five, six months away. You got time right. But if you're new to this concept, a sinking fund is just a money fund that you intentionally set aside for an upcoming expense. So let's say your holiday budget is $600. And again say we're about five months away, as this episode airs, from the holiday shopping season. That means that you need to save about $120 a month, or roughly $30 a week, starting right now. Do you see how much easier $30 a week is to save versus trying to figure out how you're going to come up with all that money at once when it gets to November or December. So that's it. Just save $30 a week and it means when December rolls around, you're going to have money ready to go. No borrowing, no scrambling, no financial stress. It feels good and, honestly, guys, it makes the holidays feel so much better. And here's the beauty of the sinking fund it makes big expenses, like I said, feel much more manageable. Now I recommend opening a separate savings account or using, say, a cash envelope, or, if you have access to a high yield savings account, earn some interest on your holiday savings as well. It's just a win-win all around.
Brad Nelson:
Number three get real about your gift list. All right, this is where people tend to overspend, and I get it. You want to be generous, right? We all know lots of people are important in our lives, but generosity it doesn't have to mean financial strength. So take a hard look at who you've been buying gifts for. Are you feeling pressured to buy for every extended family member, a coworker, a distant acquaintance? Consider alternatives when it comes to some of the gift. Sure to buy for every extended family member, a coworker, a distant acquaintance. Consider alternatives when it comes to some of the gift giving as well, like family gift exchanges, setting up spending limits or focusing on experiences instead of actual physical gifts, or just spending time together with an individual and coming up with ways to save more money and be more practical that way. And, by the way, guys, other people are dealing with holiday financial stress as well, so you might be surprised how many people are willing to actually do this, because we're all trying to figure out how to afford the holidays and make sure that we're reducing as much of that stress as we can. And here's the question I want you to reflect on too Are you buying gifts for people who don't even need them, or is it simply out of just obligation? You feel obligated to do it? Remember, you're a financial piece that matters too right, and have an honest conversation now so you're not stuck overspending later on.
Brad Nelson:
Number four get in the habit of tracking every dollar you spend. Now, if you've been listening to the Debt Free Dad podcast, we talk about this one a lot. It's like a broken record around here. Track your spending. So many people don't track. They have no idea where their money is going, and here's where people lose control, especially during the holidays, when life gets busy, because if you don't track your spending, you're going to overspend. It's guaranteed that you will overspend. Now, I'm not saying that you need to create some elaborate spreadsheet and spend hours and hours on this stuff every single day. That's not what we want you to do. Just keep a simple note in your phone app, all right. Or write it down in a simple notebook Every single gift purchase, every holiday meal, every decoration that you buy. Now, why is this important? Because seeing your spending in real time will help you pump the brakes before you blow past the planned budget that you set up. Also, guys, this is really important to do just all the time not just for the holidays, but really just for every monthly budget that you have is tracking your spending, because awareness is key.
Brad Nelson:
Now, number five avoid the last minute panic spend. This is probably the biggest holiday spending trap out there, especially if you have kids. Right, do we buy enough? Do they have enough to open? And you panic and you end up spending more money than you want to because you feel that pressure to buy. And again, during the holiday shopping season, because you're rushing and you're busy, you don't price compare. You don't look for deals, you just swipe and move on right. So to avoid this, start shopping earlier. This is the cool part about setting up that sinking fund earlier is because you're gonna have cash in a savings account. So when gifts go on sale or you see something that you wanna pick up for an individual, you can start gradually buying these things over time, especially before all that holiday noise and advertising hits right. So spread it out and you'll be less overwhelmed when it comes into December. And the beautiful part is, most of your shopping can be done and you can actually sit back and enjoy the holiday season like you should.
Brad Nelson:
All right, let's recap. Number one set your holiday budget right now. Get working on this this week. Number two start saving with a holiday sinking fund. Remember, open up a separate bank account. Make the savings automatic, put that money away and then, when it comes to time, shop. You got money to go ahead and do that. Stay out of debt. Be intentional about who you're buying gifts for. Make that gift list early.
Brad Nelson:
Number four is obviously tracking every single dollar that you spend. And again, don't just do this during the holidays, do it right now, for everything in your life. You'll be amazed at how much money you're going to find, that you can even start maybe saving more for the holidays. And then number five start shopping early and avoid last minute panic buys and all of that holiday noise that's going to be out there. And here's the bottom line the holidays should be fun. It shouldn't be financially stressful. A little planning now means a lot less stress later.
Brad Nelson:
And if you're not sure where to even find extra money to start your holiday fund, I want to invite you to check out one of our brand new workshops called Find Hidden Money. It is awesome, and in this free workshop I'm going to actually help you uncover money that's in your budget you didn't even realize was there, so you can prepare for things like the holidays without going deeper into debt. All you have to do to sign up is just head over to debtfreedeadcom, click on the free resources at the top of the page and you'll see the workshop there, and I can't wait to see how much money that you can find. All right, guys. That's it for today's episode. We will see you, guys, on the next show.
