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Financially Preparing for the Holidays

Posted By Jim On 12/21/2010 @ 12:18 pm In Credit | 9 Comments

With it being a few short days until Christmas and nearly two weeks since the end of Hannukah, it’s a little late to be “preparing” for the holidays. That, however, doesn’t mean that you shouldn’t be financially prudent in the waning few days before the crescendo. I saw the results of a recent myFICO holiday study [3] (packaged up into a pretty infographic) that gave me greater insight into the American shopper this holiday season. myFICO [4] is a part of Fair Isaac Corporation, originator of the FICO credit score [5].

Tightening the Belt

I wasn’t surprised that 75% of people would be changing holiday traditions because of the economy – that’s just smart. The holidays are important not because of what we spend in dollars, but in what we spend in terms of time. If you’re used to spending a ton and you’re feeling the pinch, it’s certainly prudent to tighten up this year. You can always have a blowout holiday season next year, when things get better.

Budgeting

The scariest statistic from the infographic, which is something that’s hard to counter right now, is the fact that 58% of people do nothing to prepare for the added bills coupled with the fact that half of respondents charged an average $100-500 more. That’s the equivalent of a small emergency! One of your New Year’s Resolutions should be to budget for the extra spending during the holidays by starting a savings fund, preferably in a high yield savings account, and contribute to it every single month. That way, when it’s time to spend, you can pay it off immediately.

Finally, to the 10% of people who sign up for an in-store credit card for the 10% discount – avoid it if you’re going to get a loan. A hard inquiry dings your score and you’ll be paying far more in interest later on.


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[3] myFICO holiday study: http://www.myfico.com/images/pr/2010-Holiday-Shopping.jpg

[4] myFICO: http://www.bargaineering.com/articles/r/myfico.php?tag=prepHolidays

[5] FICO credit score: http://www.bargaineering.com/articles/free-fico-credit-score.html

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