The urge to spend during the holiday season can be overwhelming. Not only are there dozens of holiday activities that may cost money to participate in, but you may also be trying to buy for everyone on your list. In fact, studies show that for the 2022 holiday season, about 70 percent of Americans plan to take on debt and that in 2021, approximately 65 percent of shoppers used their credit cards to pay for holiday expenditures. However, as of February 2022, only about 40 percent of those people hadn’t yet paid off their holiday debt.

As holiday marketing peaks and the desire to pull out your credit card spikes, remember that debt is not something you want to incur during the holiday season. For dealing with debt that you may already have—as well as avoiding new debt—this holiday season, consider the following tips—

Get Familiar with Your Financial Situation

Whenever you’re thinking about debt and budgeting, the first thing to do is take a good hard look at your finances. It’s critical that you understand your current debt-to-income ratio and what your current spending looks like. Review all of your current bills and assess your debts—on which debts are you currently accruing the greatest amounts of interest?

The more you know about your financial situation, the better prepared you’ll be to strategize when it comes to paying down your existing debt, setting a budget and avoiding new debts, and navigating holiday spending in a way that’s smart and responsible.

Know What You Need to Pay Down First

When it comes to managing debt that you already have, one of the most important things that you need to know is which of your debts you need to start paying down first. The debt you should pay down first is typically the debt that has the greatest interest rate or the debt with the greatest outstanding balance.

If you’re currently just paying interest, you need to think about analyzing your budget to reallocate more money to pay down your bills. Paying off your debt should be your number one priority.

If you do have credit card debt, do everything you can to avoid new debt.

Avoid Incurring New Debt

Incurring debt is never a good idea, but is especially bad when:

1) You already have debt that you haven’t been able to pay off in full, or/and…

2) You know that if you put something on a credit card, you will not be able to pay it off in full at the time that payment is due.

Using a credit card is only a good idea when you are confident that you will have the cash to pay the balance of your credit card in full and on time. Here are some ways to avoid incurring new debt that you can’t pay off in full and on time:

• Know your budget. The first thing to do when thinking about spending for the holidays is to create a budget for yourself. How much do you realistically have to spend on gifts and other holiday purchases?
• Come up with a spending strategy for gifts. Rather than writing down a list of everyone you have to buy for—which could lead you to spend more than you have a budget for—you should approach holiday spending by coming up with an amount that you can comfortably spend and then figuring out how much you want to spend on each person.

• Get creative. If you have a small budget for holiday spending, don’t panic! The holidays are about family, love, community, compassion, and gratitude, not just gift-giving. Consider having an honest and open conversation with your family and friends about your financial situation this year. Or get creative with your gift-giving. For example, plan a fun and low-cost activity as a gift, or consider making something instead of buying something.

Avoid Common Debt-Entrapping Schemes

Credit card companies and brands love to prey on people during the holiday season. This time of year, you may be tempted by sales and bargain deals, as well as the urge to participate in buy-now-pay-later schemes. Credit card companies often offer great bonuses and prizes for opening a new line of credit during the holidays.

Whatever you do, don’t be tempted to open a bunch of new credit cards or fall victim to a buy-now-pay-later option if you know you can’t afford it! And while sales may be tempting—and are appropriate to take advantage of when within your budget—don’t spend money just to spend money.

Get Help with Debt

If you’re struggling with debt, working with a financial professional is a good idea. Remember, it’s never too late to take steps to improve your financial situation.