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The holiday season is a time for celebration, but it can also lead to financial stress, especially in today’s high-interest environment. As I recently discussed on Fox 5 DC, managing debt effectively during the holidays is key to starting the new year on the right financial foot. With rising interest rates affecting credit cards and loans, it’s more important than ever to approach holiday spending thoughtfully. Let’s explore some strategies to help you stay ahead.
See the full video here https://www.fox5dc.com/video/1548636
Tackle High-Interest Debt Before Holiday Shopping
If you’re carrying a balance on high-interest credit cards, make it a priority to pay it down before the holiday shopping rush. These debts cost you the most over time, so reducing them now can save you money and provide some financial breathing room as you plan your holiday expenses.
Stick to a Holiday Budget
The holidays are full of temptations to overspend, but having a clear budget can help you stay in control. Decide in advance how much you’ll spend on gifts, travel, and other holiday expenses, and stick to your plan. This reduces the likelihood of turning to credit cards to cover unexpected costs.
Use Cash or Debit Whenever Possible
One way to avoid accumulating new debt during the holidays is to pay for as much as you can with cash or debit. This ensures that you’re only spending money you already have, helping you stay within your means and avoid adding to your credit card balances.
Take Advantage of Rewards and Promotions
If you’re using credit cards, make the most of cash-back rewards or promotional offers. Apply cash-back rewards as a statement credit to reduce your balance, and consider balance transfer promotions with low or no interest to manage existing debt. Be mindful of transfer fees and plan to pay off the balance before the promotional rate ends.
Make a Plan for Big Purchases
If you need to make a larger holiday purchase, time it strategically based on your credit card’s statement cycle. For example, if your statement just closed, making the purchase now gives you more time to pay off the balance before interest accrues. This simple step can save you money and reduce stress.
Build an Emergency Fund Alongside Holiday Spending
While the holidays are a time of giving, it’s important to think about your own financial well-being. Setting aside even a small portion of your paycheck for an emergency fund can prevent you from relying on credit cards for unexpected expenses during the season.
Final Thoughts
The holidays can be financially overwhelming, but they don’t have to derail your plans for the new year. By tackling high-interest debt, creating a budget, and using credit wisely, you can enjoy the season without jeopardizing your financial health.
Remember, managing your finances during the holidays is about balance. Thoughtful planning now can help you start the new year on a strong financial foundation. If you need guidance or support, don’t hesitate to reach out—I’m here to help you navigate this busy season and beyond.
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About the Author:
David Peters, CPA, CFP, ChFC, CLU, CPCU, CGMA, is the Founder and Owner of Peters Professional Education (petersprofessionaleducation.com) and Peters Tax Preparation & Consulting, PC. David Peters is also registered with the U.S. Securities and Exchange Commission (SEC) as an Investment Advisor Representative (IAR) with Peters Financial LLC. He regularly teaches courses in accounting, finance, insurance, financial planning, and ethics throughout the United States, and regularly contributes regularly to various professional publications, including NCACPA’s Interim Report, SCACPA’s CPA Report, and VSCPA’s Disclosures.
Required Disclosure:
The content presented above is for informational purposes only, is general in nature, and is not intended to and should not be relied upon or construed as financial, investment, or estate planning advice. This does not constitute an offer to sell or a solicitation to buy any security, investment or planning product. Past performance is not indicative of future results. All investments involve risk, including the possible loss of principal. Please consult with a financial advisor to assess your individual situation.
Financial and investment advisory services offered through Peters Financial LLC. Brokerage and custodial services offered through Charles Schwab Co. Inc., member FINRA and SIPC. Peters Financial LLC and Charles Schwab Co. Inc. are not affiliated. David Peters also offers tax services through Peters Tax Preparation & Consulting, PC. Peters Tax Preparation & Consulting, PC is not affiliated with Peters Financial LLC and clients or prospective clients are never obligated to use Peters Tax Preparation & Consulting, PC. as part of any financial planning or investment management services offered by Peters Financial LLC.
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