Family has left and the turkey is digested but those Black Friday bills remain. Follow these financial tips to recover.
Did you binge this Black Friday weekend on all those irresistible deals for 4K flatscreens and the trendy toys you didn't even know you needed?
While you are still reveling in how much money you saved by “waiting until Black Friday,” you might be in for a surprise when you credit card bill arrives, along with the Black Friday spending blues.
Whether you shopped 'til you dropped on Black Friday or not, the Christmas shopping season can quickly become a budget killer. To avoid paying interest until next Thanksgiving for this year’s purchases, you need to follow these tips to finish the year financially strong.
Never Transfer a Balance or Skip a Payment Altogether
Rule #1: Never make a credit card purchase knowing you can only afford it by skipping the monthly payment or transferring the balance. If that’s the case, wait until you have enough cash to buy it outright.
Your credit card company might have sent you a balance transfer offer or a 0% interest rate on all purchases made in November and December. These ideas sound good on paper but are an invitation for financial disaster.
If you transfer your Black Friday spending to another credit card, you might take advantage of the 0% APR that lets you pay zero interest through March, but you will still have to pay a 3% balance transfer fee on the entire balance. Sure, this is still cheaper than paying a 21% interest rate, but your purchases are still costing more than they should if you had paid cash.
Instead of thinking you have until March to pay for Christmas and Black Friday because the credit card companies are being nice, think again. Their “generosity” is only another opportunity to dig yourself into a financial hole in the new year. Just don’t do it, face your bills and pay them in full the first time.
You’ll be happy you did.
Make a December Resolution to Pay Your Bills
Instead of waiting until January, after all the holiday hustle and bustle, resolve to pay your holiday credit card debt now.
If you charge your Black Friday and Christmas purchases to your credit card, immediately write down all of those expenses on a piece of paper, so you know exactly how much additional money to set aside to cover your larger-than-normal monthly credit card statement.
Consider making an early payment just for these purchases, even on a weekly basis, as soon as you have the extra cash in your bank account, that way the money doesn’t accidentally get spent before the due date.
My wife and I will be making an early payment to pay for our own Black Friday purchases, so we don’t get surprised by the large bill once Christmas is over. We also plan on using our cash back rewards as a statement credit to offset the extra spending as well.
In 13 years of owning a credit card, we have never missed a payment and one reason why is because we make extra payments during our big-spending months to ensure we don’t overspend our monthly income.
Spend Less Money in Other Areas in December
After making an extra payment just for your Black Friday spending, take a minute to compare your remaining credit card balance to your bank account balance. Can you afford to pay the rest of the bill on time?
By being proactive and realizing that you won’t have enough cash to pay your bills in full this month, you have time to make some quick one-month adjustments to afford the bill.
Cutting costs at Christmas can be difficult, but it’s possible because time is on your side.
Depending on how your billing cycles work, you might have two full months before your Black Friday purchases must be paid for based on your billing cycle and payment window.
How do you cut spending in the most expensive month of the year?
Here are a couple of different ways to cut spending:
- Suspend your monthly subscriptions for one month (Netflix, Hulu)
- Cook your meals instead of going out to eat at work or in the evenings
- Don’t buy as many presents for your family
- Delay large purchases until you’re paid up (you’ll also get better deals in January)
Do you travel for Christmas to visit family and put presents under the tree? Consider cutting back your projected spending a little bit. You might also scale back your day-to-day spending for the other 23 days of December before Christmas starts by packing your lunch, canceling your monthly subscriptions for a month, and not making any extra purchases unless you can pay for them in cash.
Some of these decisions might seem drastic, but would you save money now to make ends meet or pay a late fee, interest charges, and a have a damaged credit score because you need an extra month to find an extra $500?
The challenge to pay your bills on time can be easier and more rewarding than you expect.
Use Cash or Debit Whenever Possible
Once you have a plan to pay all of your bills on-time, consider using cash and debit for your remaining end-of-year purchases. Paying immediately for your additional purchases will ensure your credit card balance doesn’t balloon into an unmanageable burden.
It can be easy to “spend and forget” and still have enough money to pay your bills the other 11 months of the year. That might not be the case when the average shopper spends an estimated $967 on Black Friday that they normally don’t spend.
I don’t know about you, but I usually have to pull from my emergency fund when I get a surprise bill for $1,000. Black Friday shopping isn’t an emergency, so do everything possible to not pull from your emergency savings unless that’s the only way to avoid going into debt this Christmas. If you pull from this account, replace the money as soon as possible.
Don’t Forget About Your Other Financial Obligations
Your sole financial focus shouldn’t be on how you're going to pay for that Black Friday spending binge. Consumer debt interest rates aren’t cheap, but neglecting to look at the entire financial picture in December can be just as harmful.
Check out our End-of-Year Financial Checklist to make sure all of your bases are covered to finish the year financially strong.
Black Friday only happens once a year. Making a plan to ensure your spending spree is paid for before New Years is the easiest way to start next year stress-free and on sound financial footing.
About the Author
Joseph Hogue is a financial expert and investment analyst. After serving in the Marine Corps, he started his career investing in real estate before becoming an investment analyst for some of the largest private investors. He's appeared on Bloomberg and on CNBC as an investment expert and has published ten books in personal finance. Now he helps investors reach their financial goals and invest in the stock market with some of the same advice he used when working for the rich.