8 Tips to Avoid a New Year's Credit Card Hangover

The holiday season can be a stressful time for many people.  For others it can be a time of excess.  Either way, don’t let that stress and excess give you a financial hangover.  Plus, the holiday shopping season seems to start earlier every year, making that stress longer as well.  According to a 2017 survey by RetailMeNot, 54 percent of consumers plan to begin holiday shopping before Black Friday.

A 2017 Coinstar® Holiday Survey found that 65% of Americans set a holiday budget, which means 35% did not set a budget.  The bad news is the same survey shows 77% of those surveyed expect to exceed their planned budget.

To avoid credit card shock that could start you off on the wrong foot at the beginning of the New Year, consider avoiding impulse buying this holiday season by making a strict shopping plan – and sticking to it.

Here are 8 recommendations:

Differentiate Wants from Needs

If you have children, you probably hear how they need something. Time to get tough and establish that the ‘need’ is not actually a necessity. But give a carefully chosen ‘want’ and everyone’s happy.
But what about you? Do you follow your own rules on the want-versus-need conflict?
The advertising industry would have us believe that we ‘need’ lots of things, from the latest tech gadgets to trendy new shoes. They tell us that we’re not successful or current without it. Take time when possible to think beyond this moment when you think you ‘need’ it.”

Adjust Your Budget & Stick with It

For most households, the holiday months could cost you more than the other months of the year. You can prepare in advance to help yourself cover the additional spending during this time. Instead of scrambling to buy a festive outfit or last-minute gifts and charging it all to your credit cards, consider planning for the holidays in advance. You should consider making a list of who you need to buy presents for and set a spending limit. You might also consider, if you’ll be hosting any dinner parties, how much you should budget for food. Do you have big New Year’s Eve plans? Estimate those costs as well. Once you’ve estimated these various expenses, adjust your monthly budget and make sure you stick with it. You should also consider setting aside extra money each month in the time leading up to the holidays. This could help you to have a bit of extra cash on hand when the festivities roll around.

Leave the Plastic at Home

Holiday shopping seems to go hand-in-hand with credit card debt. This is one of the major causes of the January credit card hangover. However, if you properly create a budget and save money ahead of time for holiday gifts, this can help you avoid using your credit cards. If you must use them, try to choose one with the lowest APR and that gives you rewards points or cash back, so you are getting something in return for your spending. Also, try to make sure you can pay more than the minimum due each month so it doesn’t take you years to pay off the balance because of the interest you will be charged each month.

If you struggle with credit card spending, perhaps you should try taking a shopping trip without them and bring only the cash you have available to spend. This forces you to think about the purchase and whether it is worth the cost.

Use Cash When You Can

Today, many people believe using cash may seem a little outdated, especially with so many alternative payment options available. The cash you have on hand is all you can spend.  You might discover that you will spend less with cash.  Swiping plastic doesn’t hurt like spending your hard-earned cash.  Once you start seeing your cash dwindle, you may think twice before spending it.  Using cash may also help to reduce the likelihood of unplanned purchases, increase the odds of you sticking to your budget, and avoiding that nasty holiday spending hangover.  Many people try the $100 bill test. Carry only $100 bills when shopping and you may be surprised to find it’s just harder to break a $100 bill.

Be Smart About Gifting

Obviously, one of the biggest expenses during the holidays are gifts. A common mistake that leads to excessive spending is not planning purchases in advance. You may be able to avoid blowing your gift budget and giving yourself a credit card hangover by starting to shop sooner rather than later.  This provides you the opportunity to comparison shop and keep a lookout for sales. This may help you from caving-in and buying an expensive gift at the last minute.

Know Your Personal Spending Triggers

• Are you trying to “keep up with the Joneses”? For example: Outdoor Christmas lighting and decorations can be become very competitive in some neighborhoods, and there can be a temptation to spend extra money on extravagant decorations.

• When you choose the ‘ideal gift’ for that special someone – is it really because you personally like it?

• Are you triggered to a seasonal splurge in the comfort of your favorite store(s)?

There’s no right or wrong answer to these questions.  They may help you put your spending in perspective. If certain items or luxuries influence you to overspend, then you should try to avoid them.

Set Goals, Not Resolutions

While it's a common practice for people to make resolutions in January, including financial resolutions, it is suggested to set goals instead.

Some financial goals could include creating and following a monthly budget, setting a deadline to pay off a specific debt, or even setting a deadline of saving a down payment for a home.  You should try and be realistic about the goal deadlines based on your income and household expenses.  Then you need to really attack each goal until you achieve them.

It has often been said that "people who can account for their money are far more likely to be in control of it."  This could start by curbing spending on those wants and spending only on needs.  Some easy areas to cut include eating out, coffee at a coffee shop, downloads on your phone . Pay attention to your phone and cable bill. When your bill increases little by little, it’s hard to notice, but when you review your bills in detail you may find areas for saving. 

Learn to Say No

Knowing your limits and staying within those limits may help avoid unexpected expenses during the holiday season. If a holiday activity comes up that will put you over-budget, you may consider saying no. Knowing your financial limits, and avoiding activities and expenses you can’t afford will minimize your spend.

Final Thoughts

Taking steps now to avoid the credit card hangover requires awareness and advanced planning.  Start January fresh and ready to tackle your financial goals, rather than playing catch up with your credit card bills and trying to recover from your credit card hangover.