Avoiding Credit Card Debt for Holiday Expenses

When people think of holidays, they often think of extravagant gifts and outings. Many people think these things are necessary to make a holiday memorable for everyone around. With that mentality, millions of people accumulate a startling amount of debt. While it’s hard to change the way people think of holidays and what they actually need to have fun and make it memorable, there some things that can help prevent a lot of debt being accumulated.

The way people finance their holiday trips and shopping sprees is how major debt is accumulated. Most people don’t think about financing these things with anything other than a credit card. Very few people think about their holiday desires far enough in advance to pay for them in cash. Most don’t have the finances available to pay for the dream holidays they regularly indulge in with cash. Instead, they turn to credit and quickly find themselves overwhelmed with unmanageable debt.

Avoiding and Indulging

When financing dream holidays on credit, debt doesn’t have to be part of the package. There are things that can be done to manage the debt some holidays can bring. Instead of ignoring these tips, many families would benefit for many years by sticking to 4 simple tips.

1.Create a Spending Plan

A dream holiday can’t happen without a plan. Creating a spending plan should be a huge part of planning that holiday.

A spending plan is a plan that details how money is spent during that holiday. If the spending for the holiday is more than what’s required, instead of applying for and getting more credit, people should cut some of the extravagant activities and expenses. Instead of trying to finance more luxury by credit, people can find more things that are already available to them at their destinations or find activities that are fun for them at a cost they can afford.

2.Remember the Debt to Income Ratio

All the debt that is incurred during a holiday has to be paid off and most people don’t like to remember that.

Some people think they can repay additional debts on their existing budget. That isn’t always true unless they are healthy financially. Most people that use credit to finance holidays are doing so because they don’t have the cash available to spend. Instead of thinking of dreams activities and locations, people should think of how much increased debt they can actually afford to pay back. Increasing a debt by more than 20% of income can spell disaster for most people.

3.Plan a Quick Payoff

The longer a balance remains on a credit card, the more money is required to pay it off. Don’t forget additional costs associated with financing holidays on credit.

Financing holidays on credit comes with a cost. People that intend to finance their holidays on credit need to understand they will have to pay interest on the amount of money they put on their credit cards and they should be prepared to pay for it. Paying the minimum balance on any credit card balance is not acceptable and adjustments should be made in the budget to get these balances paid as soon as possible to reduce the debts quickly.

4.Don’t Forget Net Worth

Having a huge amount of debt lowers the amount of net worth.

Having a positive net worth is best for financial health. Financing large holidays on credit lowers net worth and can be hazardous for anyone’s financial well-being. Don’t finance an amount that will jeopardize financial health and destroy net worth.

By following these simple tips, holidays on credit can be done reasonably. People will be able to enjoy themselves and have the experiences of their dreams while staying healthy financially.

Apr. 1 14'
My preblom was a wall until I read this, then I smashed it.
May. 26 14'

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