The holidays – they wouldn’t be complete without family gatherings, candy canes, shopping lists, and enormous loads of credit card debt. That’s right, research has shown that not only do people feel the need to overspend during the Christmas season, but they also go into a lot of debt in the process. With money tight following the COVID lockdowns and skyrocketing prices due to inflation, it’s only natural to assume that 2021 is going to be a more financially challenging time than ever.
What Makes the Holidays So Difficult in Avoiding Debt?
It’s easy to see why people would have trouble affording Christmas, but experts point out that not only do we struggle to buy what we want to purchase for those we love, but we also feel a push to go above and beyond. A poll showed that two-thirds of all Americans felt like they were pressured to spend more money than they actually felt good about spending. Not only are people spending money on gifts, but also feel a push for holiday expenses such as decorations, new trees, lights, and holiday photos – all of which can add up quickly. Last-minute shopping makes things even worse when shoppers feel the holiday noose tightening and are willing to pay even more to mark names off their lists.
Where Debt Comes into Play
Understandably, unless someone is a millionaire, they probably don’t have enough money to do everything that they wish for the holiday season. While holiday expenses mount, normal bills continue to be due as well, leaving families struggling to get through the season on the right financial footing. Research has shown that many people turn to credit cards to help cover the expenses of Christmas and getting through the month of December.
Those who are already struggling with credit card debt are even more likely to swipe their cards to pay for gifts, with 65% of surveyed parents with young children admitting that they will go into debt to ensure their kids get a good Christmas. Now, with AfterPay and other buy-now-pay-later platforms, credit card debt is showing to be increasing this holiday season more than ever. Meaning many families will see a big bill first thing at the start of the year.
Steps to Avoid Debt During The Holidays
While Christmas may seem like a reasonable time to add to your credit card debt in search for the “perfect” holiday season, most people get a reality hit once the holiday is actually over and they’re starting the new year in deeper financial trouble. Some steps to keep in mind when shopping for the holidays are:
- Shop in Advance. Last-minute shopping can make it even more tempting to swipe a credit card. After all, if you have nothing to present your mother-in-law at tonight’s party, you’re going to be willing to go way out of your budget to get her anything. If you get your shopping done in advance, you won’t feel pressured to buy whatever the stores have to offer.
- Shop Around for the Best Prices. Kids can have expensive wants with electronics being high-priced. Before you plunk down money at the first store you go to, have a detailed list and shop around. By checking prices out online, you might be able to save hundreds on your shopping.
- Minimize Spending and Increase Low-Cost Activities. You actually don’t need a professional photographer to make your family Christmas photos look good. If you can’t afford something, try to minimize your spending by focusing on things that will cost less.
- Remember the True Meaning of the Holidays. It can be easy to get caught up in the glitz and glamor of the stores, but few people consider that to be the true meaning of the Holidays. Whether you are religious or simply view the holidays as a time to reconnect with family, try to keep your true meaning in mind.
Different Types of Holiday Debt – Secured and Unsecured
If you find that you are getting into debt during the holiday season, it’s important to understand the difference between secured and unsecured debts. Secured debts are loans that are backed by collateral. For instance, if you have to take out a loan and put your car up for collateral then it would be a secured loan. Unsecured debts are loans like credit cards where there is nothing truly backing what you owe. While no kind of debt is good, unsecured loans provide the best outcome during a bankruptcy.
How Bankruptcy Can Help Holiday Debt
If you reach the new year and discover that your finances are worse than ever, it might be time to consider filing for a Chapter 13 or Chapter 7 bankruptcy in Philadelphia. While bankruptcy can provide a a short term decrease in credit rating score, it can also help to provide you with a fresh financial footing. During a Chapter 13 bankruptcy, you can expect to see your secured loans refinanced while unsecured loans may ultimately be done away with at the end of your payment plan. A Chapter 7 bankruptcy works to eliminate your debt entirely after potentially liquidating some property that you may no longer find you wish to keep.
As you enter the holiday season, it’s important to avoid reaching for your credit card when you go to pay. However, if you find that you wake up in the new year with mounting debts, there is still hope for the future. Contact our offices today to learn more about how bankruptcy can help you recover your finances through a free consultation.