Christmas is a time for giving. But it can also be a time to feel pressured to give beyond your means.
?When you hear the word ?Christmas,? perhaps the very first thing you think about is having to buy gifts for all those people, and you think, ?How am I going to afford it??? said Jamie Pomeroy, a financial advisor in Winona, Minn., and founder of Financial Gusto.
Many Americans actually feel this way. Credit reporting agency Experian surveyed consumers before the 2015 holiday shopping season and found that 41 percent felt obligated to spend more than they could afford. About half said they felt stress and anxiety when thinking about holiday shopping, and 60 percent said holiday shopping put a strain on their finances.
?If just the thought of Christmas stresses you out, it might be a clear sign that you can?t afford it,? said Pomeroy.
That?s probably not what you want to hear. After all, who wants to forgo celebrating Christmas? But you won?t be celebrating the debt you have racked up and the financial hole you?ll have to dig out of after spending more than you can afford.
Feeling stressed is just one of several signs that you might not be prepared financially for the holiday season. If you recognize these red flags and take steps now, though, you might be able to enjoy Christmas without putting your finances at risk.
YOU DON?T HAVE A HOLIDAY BUDGET
That anxiety you?re feeling about the holidays might be due to the fact that you haven?t taken the time to figure out how much you can afford to spend.
?Show me someone who is stressed about Christmas, and I?ll show you someone without a budget,? said Pomeroy. In fact, the Experian survey found more than half of consumers have shopped for the holidays without a budget.
However, you still have time ? especially if you haven?t started buying gifts yet ? to calculate how much you can afford to spend. You might find that you have enough to pay for the holidays without relying on credit. But if you?re going to come up short, you can pinpoint discretionary expenses to trim, such as restaurant meals, happy hours and movies at the theater.
Figuring out how much you can afford to spend on gifts sooner rather than later will also give you time to talk with friends and family about gift-giving expectations.
?Make it clear with your family or significant other how much your budget is for each,? said Brandon Hayes, a certified financial planner with oXYGen Financial in Atlanta. Do this as soon as possible so that everyone is on the same page and won?t feel compelled to one-up each other by spending more, he said.
YOUR EXPENSES EXCEED YOUR INCOME
?If you don?t have money to pay your regular bills, you can?t afford Christmas this year,? said Holly Johnson, a frugal living expert and co-author of the forthcoming book ?Zero Down Your Debt.?
You might have time before the holidays to cut some of your bills and regular expenses ? such as groceries, wireless phone service and cable TV ? to have a little more cash for gifts. But, you might just have to take a step back this year, Johnson said.
?Tell your family and friends you?re on a tight budget and opt out of as many gift-giving opportunities as you can,? said Johnson.
You can also consider no-cost gifts, such as an offer to babysit friends? and family members? children or coupons your kids can cash in to spend one-on-one time with you doing an activity of their choice that doesn?t cost money, such as playing a video game they already have.
YOU NEED TO USE CREDIT TO BUY GIFTS
The Experian survey found about half of consumers were planning to use credit cards to pay for holiday shopping last year.
It?s one thing if you shop with credit cards to earn rewards points and then pay down your balance. But it?s a red flag if the only way you can afford to buy gifts is by charging them, said Johnson.
However, it?s an even bigger problem if you have to open a new credit card to fund Christmas, said Renee K. Collins, founder of RKC Tax & Financial Services in the Chicago area. After all, opening a new card often means existing ones are maxed out. You don?t want to add more debt to what you already have in order to buy gifts.
This holiday season, prioritize paying down your debt over paying for Christmas gifts.
?Be creative,? said Collins. ?Make gifts instead. You will feel much better once the holidays have passed knowing you can start the new year without the burden of holiday debt.?
YOU?RE STILL PAYING OFF LAST YEAR?S GIFTS
?This might be surprising to some, but some consumers can?t afford Christmas 2016 because they are still paying off Christmas 2015,? said Leslie Tayne, financial attorney and author of ?Life and Debt.? ?Before making any additional purchases, focus on paying down your debt.?
Create a plan to tackle your debt by either paying down the smallest balance first to generate momentum or paying the balance with the highest interest rate to reduce the amount of interest you pay over time.
?If you are struggling to pay your debt off, then you might want to consider meeting with a debt attorney or financial counselor to put you in the right direction,? said Tayne. ?Your debt and essential expenses are the most important. Plan to put any extra money toward your debt first before you do your holiday spending.?
YOU HAVE A BIGGER GIFT LIST ? BUT THE SAME BUDGET AS LAST YEAR
Problems arise when the size of your Christmas budget doesn?t increase along with your gift-giving list, said Tayne. But if you act now, you still have time to prepare.
Find more cash for your holiday budget by identifying non-essential expenses that you can cut, said Tayne. Or, adjust the amount you spend on each gift.
For example, if you had a budget of $300 to cover 10 people last year and spent $30 on each but now have to buy gifts for 15 people, you?ll have to limit spending to $20 per person. If you gave several gifts to certain people, opt to limit giving to one present per person to ensure you don?t fall into debt, added Tayne.
YOU?RE SAVING FOR A BIG FINANCIAL GOAL
You might be saving for a big expense this year, such as a wedding or down payment on a house.
?This leaves you with a lower Christmas budget ? or no budget at all,? said Tayne. ?Don?t fret. Your new home or wedding is a priority right now, and your family will understand.?
Don?t let holiday spending derail your big goals. If you feel compelled to buy gifts, look for other expenses you can cut so you don?t jeopardize your savings, said Tayne. Or, suggest to your friends and family that you draw names so that you only have to buy a gift for one person.
Better yet, suggest that you enjoy a shared experience together that?s free ? such as volunteering or caroling.