If you're among many New Jersey residents who celebrate one or more holidays from Thanksgiving through New Year's, you may also be among those who purchase gifts for friends and family or who spend money traveling, dining out, hosting parties or on other festivities. That's all well and good if you have the cash to foot the bill; however, in many cases, people use their credit cards, thinking they'll pay it off at the end of the month and then they don't.
Leaving a balance on your credit card when a pay cycle ends typically prompts increased interest charges. If you go through several cycles without paying your entire debt, you stand to lose a lot of money in interest alone, not to mention you will still have outstanding debt on your card -- or cards. You may want to avoid several things during the holidays if you hope to avoid serious financial problems. It's also good to know where to seek support if a problem does arise.
Holiday spending pitfalls
The following list includes common mistakes New Jersey residents and others often make during holiday seasons when they are spending more money than they have on hand:
- Using emergency funds for non-emergency expenditures
- Failing to write out a holiday spending budget
- Writing out a holiday spending budget but failing to stick to it
- Tapping into retirement funds when cash flow is low
- Spending beyond available means
- Using credit as cash
- Buying luxury gift items when simple fare would suffice
There's absolutely no harm in explaining to friends and family that your goal this year is to simplify your celebrations. You can exchange homemade gift items or set a reasonable spending limit so you don't break the bank trying to buy high-end items you can't afford. You may also want to consider providing service to others instead of buying gifts.
Even if you try to budget and stay within your spending limits, any number of things can happen to throw your finances out of whack, especially during the holidays. Someone in your household might get laid off from work or you might face an unexpected medical situation where you're unprepared to meet expenses. If your finances go from fragile to crisis mode, you may want to explore debt relief options, including Chapter 7 or Chapter 13 bankruptcy.