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Holiday-Ready Finances: 8-Part Checklist for Your Budget and Your CreditWhether you think you have all your bases covered, or you know you’re in over your head, this 8-part checklist can help you get holiday-ready finances.

Equally instructional and motivational, this checklist will walk you through the process of creating a holiday budget and a strategy for sticking to it, including affordable gift ideas, holiday sale best practices, how to use (and not use) your credit cards, and what to do when you realize you’ve spent too much. We also cover ways you can hurt your credit during the holidays and the credit-healthy choices you can make instead that are good for credit building and credit repair.

1) Do you have a holiday budget?

Even the best budgeters among us forget to include every category of spending. Holiday expenses is a perfect example.

Ideally, the budget you use year-round includes a set amount of monthly savings that you designate to a holiday spending category. Simply add up what you normally spend during the holidays, divide by twelve, and set aside that much every month. But don’t stop there.

The money you save all year long for holiday expenses should have a budget of its own. Learn how to create a holiday budget that breaks holiday spending down into subcategories: gifts, food, travel, and charitable giving.

2) Are you saving for holiday expenses?

It’s not too late. There is plenty you can do to come up with some money that doesn’t involve charging up your credit cards. As of this writing, you have 11 weeks until Christmas. That’s plenty of time to stockpile a little something that could contribute a lot to your holiday budget.

Think about it. Are there any extras you could eliminate for the next three months? Extras that are nice to have but that you don’t really need? Could you cancel one or more of your streaming services? Make your own lunch? Skip the latte? Hang out with family and friends at home instead of going out?

If these and other ways of cutting back help you set aside just $25 a week from now until Christmas, that’s $275 you can use to budget for the holidays this year.

3) Could you cut your holiday budget in half?

Even if you save a little extra each week between now and Christmas, it may not be enough to cover everything you want to do for the holidays this year. If it feels like your only option is charging the shortfall to your credit cards, then you haven’t seriously considered the smarter alternative — cutting your budget in half.

Only you know the categories of holiday spending that are more flexible than others for you, but one flexibility we all share is in how much we choose to spend on gifts.

  • Not convinced a $25 gift can be just as special as a $50 gift?
  • Can’t imagine changing your gift idea?
  • Worried you won’t be able to find gifts that are both cheap and thoughtful?
  • Afraid they’ll know you spent last?
  • Think it’s a good idea but something you should wait and try next year?

Legitimate concerns, all of them, and we have answers that address every one.

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4) Do you have affordable gift ideas?

It’s one thing to embrace the idea of buying less expensive gifts. It’s quite another figuring out what those gifts should be. Get as creative as you like, but if you get stuck, or just need a place to start, we have some ideas.

Check out our 50 cheap (and thoughtful) Christmas gift ideas that can work for holiday budgets with spending amounts ranging from $5 to $50 per person.

Too late to spend much time putting creative gifts together? Check out our 5 easy fixes for last-minute gifts you can find at the grocery store.

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5) Are you avoiding credit cards?

If you’re in the habit of charging holiday expenses to your credit cards, you’re not alone. It’s a habit that many of us practice as though it is its own holiday tradition. But while there is nothing wrong with credit card charges that you pay off within 30 days, carrying a balance for months into the New Year is an expensive habit that’s simply not worth the payoff.

As exciting as it is to see the faces of family and friends as they open your gifts, what they will appreciate more is you staying within your budget so that you don’t spend every month thereafter paying interest on their gifts instead of putting that money toward your financial goals.

Before charging a gift to your credit card, ask yourself this:

1) Is the item on your list?
2) Is it at or under the amount you planned to spend on this person?
3) Can you pay off the charge by the due date?

If the answer isn’t yes to all of these questions, don’t charge it. If this leaves you scrambling to afford everything on your list:

  • Lower the amounts you were planning to spend on everyone
  • If you’ve already bought gifts, return them and buy less expensive ones
  • Suggest a gift exchange in which family or friends draw names so that each person only gives (and receives) one gift within the group
  • If your family or friends have a set spending cap, talk to them about lowering the limit; chances are they will not only be receptive to it but grateful that you were the one who brought it up so that they didn’t have to

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6) Do you know how to make holiday sales work for you?

You have to be careful on Black Friday and Cyber Monday. On the one hand, they can be great days to get good deals. On the other hand, they can be dangerous days when you get too caught up in the shopping frenzy and make costly mistakes.

You’re not making holiday sales work for you if you are:

  • Going over your budget
  • Buying things that are not on your list
  • Buying things that are not on sale, an especially tempting thing to do if you’re not finding the sale items you’d hoped for buy you’re in the buying mood
  • Not comparison shopping (before you leave the house or click the buy button, make sure you know what other retailers are charging for it)
  • Not asking about price matching (many stores price match, but exclusions apply)
  • Not asking about the return policy, a nice safety net to have in case you do go over budget and need to get your money back
  • Not keeping your receipts (even stores that don’t require them for return items often only give you store credit)
  • Not making sure online stores are secure (look for https:// and the lock icon)
    Hitting the sales by yourself when you know you do better shopping with a family member or friend who can help keep you in check

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7) Have you already spent too much?

The answer is yes if any of the following circumstances are true for you:

  • You’ve gone over your budget
  • You’re charging more to your credit cards then you can afford to pay off within 30 days
  • You’re compromising important financial goals in the New Year

If any of these ring true for you:

  • Don’t spend another cent
  • Return items you’ve already bought and replace them with less expensive gifts
  • If you still have people to buy for, stretch the money you get from returned items to include them, too

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8) Are you keeping your credit in mind?

The holidays have a way of suspending reality for a while. It happens with money, of course, talking yourself into spending more than you know you can afford through all sorts of rationalizations: Christmas is only once a year. The people you’re buying for are worth it. You already have so much debt; what’s a few hundred more dollars?

The holidays can have a similar effect on how you treat your credit:

  • If your credit is great, maybe you think you can afford to be a little reckless. Or maybe you underestimate the impact of certain behaviors on your credit score.
  • If you’re repairing your credit, and really deep into the process, maybe you feel like a break is deserved. Or, if you’re just getting started, maybe you rationalize that this can be one last hurrah before you really get serious about cleaning up your credit score.
  • If your credit is bad and you’ve not done a single thing to make it better, maybe you think the damage is already done. How much worse can it get?

Yet, it is because of these tempting rationalizations that you have to be more disciplined with your credit behavior during the holidays than any other time of year.

Ways you can hurt your credit during the holidays

  • Charging more to your credit cards then you can pay back with cash by the due date
  • Using more than 30% of your available credit at any one time
  • Maxing out your credit cards, sending your credit utilization ratio through the roof
  • Paying late and having the account sent to collections
  • Falling so behind on payments that the credit card issuer charges it off
  • Not following smart shopping practices that help protect against ID theft and fraud

Ways you can help your credit during the holidays

  • Using cash instead of credit
  • If you do use credit, only charging as much as you can afford to pay back within 30 days
  • Never using more than 10-30% of available credit at any one time, the ideal
  • credit utilization ratioReturning your credit card balance to zero every month, not only helping your credit score, but eliminating the possibility of interest fees
  • Paying all of your bills on time
  • Signing up for credit monitoring to track credit progress, and to detect errors and fraud
  • Freezing your credit to help protect against fraud, recommended by experts and regulators in the wake of the Equifax hack

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