Tips for Becoming Debt Free While Still Celebrating the Holidays

a checkbook, calculator, and money on a table

Tis the season of giving! With that holiday spirit circulating through families and friends, it can be difficult to not show everyone how much you care about them with lots of gifts. While showing people how much you love them during the holidays is always a fun time, it can put a serious damper on your finances. If one of your New Year’s resolutions is becoming debt free, here are some great tips and tricks from us at Liberty Debt Relief to help you get a head start, while still making sure everyone on your list gets a gift they will love.

Tip 1: Know Your Budget

Anyone who has ever asked how to be debt free receives this tip as their first answer — set a budget and stick to it. If you do not already have a budget in place, take the time to look at your essential costs every month, such as rent, car payments, food, phone, utilities, insurances, and so forth, as well as your non-essentials, including leisure activities, monthly subscriptions, and more. Whatever surplus of money you have after your essentials and savings you can allocate toward your holiday spending. Whether you have $100 to spend or $1,000, the key is to make sure you do not take money away from your bill payments just for holiday gifts.

Tip 2: Stay Away from Credit Cards

Along with not dipping into the essential categories of your budget, it is also important not to get an extra credit card or loan just to help pay for presents. While it may seem worth it in the short term to be able to make as many people as possible happy during the season, taking out an extra line of credit can set you up for a bad situation in the new year and prevent you from becoming debt free. You will have to start payments in January and, if you do not have the money now, you will likely not have it within just a few weeks. Taking out an extra line of credit puts you at risk of significantly lowering your credit score (putting you into more debt) and can have a severe impact on your mental and emotional health soon after January first.

Tip 3: Limit Your List

If you are one of the millions of people who are limited in what they can spend on their loved ones during the holidays, there are plenty of alternatives available. Instead of spending $50 for each of the people on your list of 100, consider cutting down on what you get individuals. Your hairdresser, for example, does not necessarily need that beautiful coffee mug you saw at the department store. You can also get gifts for couples and families instead of individuals to save some money. If you are really strapped for cash but want to give those you are closest to a gift they can truly cherish, consider giving them gifts of time instead of value. Plan a home cooked meal and night of card games with your grandparents, bring your friends over for a game of White Elephant and holiday movies, or maybe even give out coupon books of activities that can be done throughout the new year. Not only will this create lasting memories, but learning how to better allocate funds over time can help you be debt free all year long.

Tip 4: Consider Doing it Yourself

If you really want to start off New Year’s as debt free as possible, consider going the do-it-yourself route. Not every gift has to be an expensive luxury item. You can easily save hundreds of dollars by making similar bulk gifts for all or most of the people on your list. Sweet treats are always a holiday favorite and you can easily put a cute bag of cookies or hot cocoa mix together for the ones you love for only a dollar or two per person. If you like being extra crafty, there are great items you can make, like Christmas tree ornaments, that everyone will love. Choosing to create gifts instead of buying them is always a great step forward to becoming the debt-free person you have always wanted to be so you can start off the new year stronger than ever.

Tip 5: Put Your Holiday Bonus to Good Use

Not everyone gets a holiday bonus at work, but for those who do, it can be a huge factor in how you start off the new year financially. These bonuses can generally be up to several hundred dollars. Instead of using that on additional presents or splurging on a longer vacation, bonuses are the perfect way to make payments toward credit cards, student loans, or even pay some bills in advance. Anyone looking for helpful tips on how to be debt free should always start with their budgets and see where extra funds may be better used and extremely helpful in lowering their total debt.

Tip 6: Use Those Credit Card Rewards

Similar to Christmas bonuses, credit card rewards can be a major financial asset. Many credit card companies offer cash-back promotions throughout the year when you use the card at various retailers, gas stations, and grocery stores. You could have another several hundred dollars available towards your debt. If you own several credit cards and have a lot of extra cash-back funds available, this could be the opportunity that allows you to get out of debt without taking money from your holiday budget.

No matter how you spent the previous year, the new year is the perfect opportunity to make progress toward all of your goals — including the financial ones. Becoming debt free is a huge accomplishment and by following a few simple steps, you can earn this achievement of a lifetime for a future that merry and bright.

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