Despite continuing inflation and rising interest rates, holiday spending trended upwards in 2023. According to The National Retail Federation‡ total retail sales were up 0.44% in December and up by 5.32% for all of 2023 as consumers maintained their ability to spend.
However, credit card balances increased by 13.2%, according to Experian‡. As you recalibrate your finances for the year ahead, assess your overall financial situation and make a budget. Consider selecting a payment strategy that works for you, like cash versus card, and do your research on the best time to buy.
Review your holiday debt
Before you plan for the future, you first need to assess the holiday damage. Figure out how much you spent and how much you owe on credit cards and then put together a plan to pay off your debt. Since there’s usually a substantial rise in your spending habits over the holidays, you will need to adjust to move forward and perhaps cut back the first few months of the year.
After the presents have been opened and the season comes to an end, address the credit card with the highest balance first. Your credit score is critical to your financial future. Staying on top of payments and ensuring your credit report reflects fiscal responsibility all year long is of utmost importance. Do not let the holidays distract you from making payments on-time and in-full whenever possible.
Tightening your budget
The new year is always a good time to sit down and re-evaluate your budget and establish goals for the new year. Try to learn from your shopping experience this year. Big holiday purchases can overhaul your normal budget so see what changes you can make over the next few months to set you up for success. Are there a few everyday purchases or recurring subscriptions you could go without?
Cut costs by determining which expenses are necessary and which expenses are luxuries. To recover quickly from the holiday, you will likely need to stop spending as much on eating out at restaurants, entertainment or the clothes and electronics you don’t need right now.
Planning for next year
Because holiday decor and other seasonal items will likely be on sale after the season ends, consider stocking up now while prices are low. For next year, consider spreading your holiday shopping out throughout the entire year so that the financial blow will have far less of an impact at the end of the year. If you buy all the gifts on your list at once, it can really add up quickly and impact your finances, but if you buy certain items ahead of time, it can lessen the blow to your bank account. If your savings account felt strained this buying season, consider setting a budget for next year and tuck away a monthly amount to accumulate for next year.
The holidays should be a fun time with loved ones and is still a time to let your loved ones know you appreciate them, but don’t let the shopping force you into the red. Plan ahead, save early and budget effectively.
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