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The holiday shopping season is here, and many people will be spending more than they anticipated. While buying presents for family members and friends is certainly enjoyable, the holiday debt hangover is anything but.

So how can you avoid the debt and still have fun this holiday season? If you want to emerge from this special time of year and enjoy a debt-free new year, you need a proactive plan for controlling your spending and avoiding impulse purchases. Here are five simple steps to help you avoid holiday debt.


Step 1 – Establish an Overall Holiday Budget

The first step is establishing an overall holiday spending budget, and this figure will depend on a number of factors, including your income, your savings and a host of other factors. If you have had a very good year with your income and investments, you might want to spread some of that wealth around when the holidays roll around. If it has been a tough year, it may be time to cut back on your spending, buying fewer and less expensive presents for the people you love.


Step 2 – Factor in Auxiliary Costs

It is easy to focus on the cost of the presents you plan to purchase, and that will be the overwhelming majority of your holiday spending. Even so, there are auxiliary costs as well, including the price of shipping, wrapping paper, bows and even tape. Depending on your overall holiday budget, these associated costs could account for 5-10% of your overall holiday spending.


Step 3 – Purchase a Prepaid Gift Card for Your Holiday Spending

An old trick to control holiday spending was to pay cash, but with online shopping that is no longer tenable. One alternative is to purchase a prepaid gift card for the total amount of your predetermined holiday spending budget. Look for a prepaid card that does not charge a fee; these cards are available at many banks and credit unions.


Step 4 – Divide Your Budget Among All Your Intended Recipients

Now that you have your prepaid gift card in hand, you can start divvying up the electronic cash. Think about who you plan to purchase gifts for, and how much you expect to spend. Armed with that information, you can start shopping around for the best prices, so you can make the most of your holiday shopping budget.


Step 5 – Choose Your Gifts with Care

With a limited budget to work with, it is important to make the most of every dollar you spend. Now that you know what you want to buy, you can use price drop alerts, purchase protection programs and other techniques to get the most for your money. Learning to use these techniques will be important, not only for the holiday shopping season but long after the wrapping paper has been thrown away.

The holidays should be about fun and family, not financial concern and uncertainty. As the holiday season approaches, now is the time to make your plan, and the five steps listed above can put you on the road to an exciting, satisfying and debt-free shopping season.



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