By Andrea Woroch
The upcoming holiday season may have you feeling joyous and anxious at the same time thanks to all the seasonal expenses, gift purchases and travel costs you will take on in several short weeks. Those who don’t prepare ahead may find themselves relying heavily on credit cards and, ultimately, be in debt come January. In fact, a survey shows Americans racked up an average of $1,230 of debt over the holidays in 2018, which they expected to takeat least three months to pay off. Some consumers only planned to make minimum payments, which means they’d be paying off that holiday debt for years to come. Given today’s high interest rates, taking on credit card debt over the holidays can become increasingly hard to manage and add up in fees.
Luckily, you still have time to prepare ahead and line up your finances in time for the holiday. Just follow these seven money moves to avoid debt this jolly season.
1. Book travel now.
Typically, you need to book your flight approximately 6 weeks prior to your desired departure date in order to score the best ticket price. When it comes to the winter holidays, however, this rule goes out the window. Prices will continue to climb as each day in October and November passes, so begin tracking flight prices using services like Hopper and snag your airfare as soon as possible. At the very least, book a one-way departure flight, which gives you time to figure out when you want to return home. It’s a good idea to reserve your hotel room now, too. The longer you wait, the fewer options you will have.
2. Cash in on unused items.
With the release of the new iPhone, you may be looking at trading in your old phone. Did you know you can actually get more by selling it online yourself? For example, AT&T offers $325 for the iPhone X, but you can make up to $576 by selling on eBay. Don’t forget you can sell other items like clothes via sites like Poshmark or Tradesy, household items or sporting goods through Facebook Marketplace or toys (and make room for new toy gifts) via OfferUp.
3. Boost your cash flow with a side hustle.
Extra spending cash will come in handy this time of year, especially for all those unexpected expenses that seem to creep out of nowhere. Although you may not get your year-end bonus until after the holidays, you can supplement your income with a side hustle. Thankfully, there are plenty of side gigs you can manage from home whenever it’s convenient for you. For example, you can earn as much as $1,000 extra per month by dog sitting in your own home on nights and weekends through Rover.com. You make your own schedule and set your parameters, so it makes it easy to earn side income without interrupting your lifestyle.
4. Earn money on your savings.
If you’ve begun saving toward the holidays, that’s a great first step. However, using a traditional bank isn’t. If you aren’t earning at least 1% on your savings, you’re leaving money on the table. Your best bet is to open a high-yield online savings account to stash your cash, which offers a better return on the money you’ve saved. Online banks like Ally and Tab Bank offer between 1.8% to 2.4% APY, which is basically what they give you back on your savings. Neither require a minimum balance to open an account. Before opening an account, though, verify that the bank is FDIC-insured and read the fine print for any hidden fees.
5. Review loyalty and credit card rewards.
Between loyalty programs through hotels, airlines and retailers, as well as credit card rewards, you may be surprised how many points, miles or cash back you have accrued that could be used toward holiday spending. Review all accounts and make a plan for how to redeem your rewards this season.
If you’ve got a handle on your credit card management, consider cards that offer sign-up bonuses like extra airline miles or free cash, which can help cover a variety of holiday purchases. Just don’t carry a balance from month to month, as paying interest cancels out any rewards you earn.
6. Access your earnings before payday.
Considering that 78% of American workers are living paycheck to paycheck, people often rely on credit cards to cover all those extra and unplanned purchases before payday hits. Luckily, you can avoid interest fees and save money by using a free app like Earnin, which gives you access to your earnings before you get paid.
7. Start shopping now and chat with loved ones.
Waiting until December to buy gifts for everyone on your shopping list will put you in hot water with your budget and can quickly lead to an unmanageable credit card bill. Alleviate some of the budgeting pressure by spreading out purchases over the next several weeks leading up to the holiday. Pre-Black Friday sales will roll out in early November, so you can pick up one or two gifts and then save up for the next round of shopping without taking on debt.
This is also a good time to talk about gift expectations with loved ones. Maybe this year you could all decide to nix gifts for adults and only buy for the kids or set up a Secret Santa exchange so you only have to buy one gift.
Excessive debt can impact your credit score by raising your credit utilization, the amount of credit you’re using relative to your total credit limit. You can check your credit score and read your credit report for free within minutes by joining MoneyTips.
Andrea Woroch is a nationally recognized consumer and money-saving expert.