Holiday debt

Don’t get ambushed by mounting costs this year

There’s a magical feeling in the air this time of year, but that magic costs money.

With some planning, you may be able to avoid holiday debt. But if you go over budget and carry some credit card balances, there are ways to limit the damage to your finances.

1 Start with a plan Begin with your budget and gift list, along with a grocery list if you’re hosting any parties. Shopping apps and web browser extensions can make it easier to compare pricing at different merchants, find coupon codes and earn cash back, but it can be easier to overspend due to the convenience.

“All of these different companies are trying to create the fastest, most friction-free way to purchase things,” says Emily Rassam, senior financial planner at Archer Investment Management in Charlotte, North Carolina.

2 Watch out for sneaky costs Don’t forget smaller details that add up, like decorations and gift wrap. Reuse what you can. Rassam recommends looking for deep discounts on these items immediately after the holiday season ends.

Hosting parties is more expensive now, too. Beth Moncel, founder of Budget Bytes, an online resource for learning how to cook with a small budget, suggests sticking to a simple holiday menu. “Classic recipes are simple, don’t require fancy ingredients, and are still totally delicious. Especially if you add an extra dab of butter,” Moncel said in an email.

3 Create a debt repayment plan for the new year If you get into holiday debt, add paying it down to your list of New Year’s resolutions.

• Reduce interest payments: Consolidate high-interest debt with a balance transfer credit card or a personal loan. But note that although these products can help you spend less in interest (depending on what terms you qualify for), they don’t address why you got into debt in the first place.

• Trim costs and attack debts: Look through recent credit card and bank statements to see where you might be able to cut back. Any savings you achieve this way can be applied toward credit card payments.

• Seek help: Financial professionals and nonprofit credit counseling agencies can help you see your full financial picture. It can be hard to sort through money issues alone, but unbiased advice can make it easier to get started.