Only two out of five people reported using a budget this year, according to the National Foundation for Credit Counseling (NFCC). And more than a third (37%) are carrying credit card debt over from one month to the next.
To avoid getting in more debt during the holidays, the NFCC recommends people review what’s coming in and going out in order to set a budget for holiday shopping. Here are three key things to look at:
How much debt is being carried
How much is being spent and on what
Without taking stock of income and spending, it can be hard to know how much one can afford during the holidays. Although 71% of adults say they pay their bills on time, if they are making payments on revolving credit card debt, high interest rates can keep them from making a dent in their debt load.
Lack of savings can lead to more debt
People often rely on credit cards during the holidays if they haven’t saved up for holiday gift giving. That can mean adding more bills to existing debt, making it even harder to pay off credit cards.
To take a true assessment of their financial standing, people need to sit down and crunch some numbers to come up with a household budget if they don’t already have one. There are a plethora of online tools that can help them do so.
The NFCC offers a checkup tool, which is an online questionnaire. Consumers answer a series of questions relating to their household size, income, expenses and debt before getting a custom analysis with recommendations for holiday spending.
The tool is one of the NFCC’s options for people who want to be proactive about improving their financial situation. The checkup feature is part of the Sharpen Your Financial Focus initiative, recently launched by the NFCC in cooperation with Bank of America, Chase, GE Capital Retail Finance and Wells Fargo.