Budgeting for the holidays.
The holidays may be the most magical time of the year, but they can come with a lot of expenses On top of the cost of parties, decorations, feasts and fun outings, there’s also pressure to snag the perfect gift for all your loved ones and more. Buying gifts for everyone on our list can quickly become expensive and cut into regular, essential budgets.
To help shoulder this financial burden, you might be tempted to put off your essential bills to create a budget for the holidays. But this can cause even more financial stress later on. Below, we outline a few things to keep in mind when shopping for your holiday gifts.
Picking the right way to pay it off.
Predatory lenders earned their name for good reason – they dangle benefits without telling consumers the potential consequences of their services. Predatory lenders come in many different shapes and sizes, but two of the most commonly used during holiday shopping are payday and buy-now-pay-later lenders.
Both options sound great at first, but lenders don’t clearly outline the exorbitant interest rate, unexpected fees and other fine print that can ruin your credit score. Buy-now-pay-later lenders, usually in the form of popular apps, are especially dangerous thanks to trendy and clever marketing. Consumers can quickly rack up debt and have difficulty paying the loans off if the service is used irresponsibly.
Instead, many stores offer layaway programs that allow customers to pay off the item interest-free over several months and pick up the item when payments are complete. This is a safer alternative to short-term loans and can help families make large purchases without sacrificing essential expenses or using debtors with high interest rates.
Protecting your assets.
Some loans don’t appear to be loans at all – making them all the more predatory. These often come in the form of second mortgages or car title loans, which put the most valuable and essential assets at risk. When you take out a second mortgage or sell your car title for extra cash, you use your home or vehicle as collateral. This means if the loan is not paid off, lenders can take possession of your home or your car. Car title loans are especially risky because they usually don’t come from a reputable lender and typically have such high interest rates that paying them off is nearly impossible. Unless you’ve received advice from an accredited financial expert, you should never use your home or vehicle as collateral for extra cash.
Finding the real meaning of Christmas.
While layaway is a relatively safe way to spread big purchases out, it's not the only way to avoid debt around the holiday season. As the clichéd saying goes, the true meaning of the holidays is about more than the latest toys. There are plenty of ways to give beautiful, meaningful gifts and stay within your budget.
Many toys, electronics and even clothes can be purchased secondhand from reputable sellers at a lower cost. Planning ahead and shopping sales throughout the year can also help you stay within budget and avoid last-minute overspending. Gifting something meaningful can also help prevent overspending. Try making a casting of a pet’s paw, framing a special photo or finding something in a thrift store that reminds you of a favorite memory. After all, showing others that you care is what gifting is all about.
Budgeting for the holidays can feel overwhelming, but planning ahead and educating yourself on safe purchasing habits can save you money. For more information on predatory lenders in general, check out our May blog or attend one of our homebuyer education courses.
