## Paying for the Holidays

The holidays have passed, and we are back to our normal routines, but some of us are still paying for the holidays. As the bills start to roll in, add up how much you spent. If you put part or all your expenses on credit, you will be paying more than the original cost. So, this is the time to be sure you know how much you spent. It may also time to start saving for the next holiday.

###### What you really paid

It is so easy to get excited about giving to family and friends. Advertisers are very good at what they do. They are good at getting you hooked into buying things. They know how to set great prices or how to make you think something is the perfect gift. But, when it comes time to pay for them, payments are all ours. Let’s think about that great sweater that was on sale for 60% off, and you put it on credit. With store credit card averaging 20 to 25% APR, think about the real cost. The \$70 sweater that you gave your mom was a great buy at \$28. But if it is on a credit card (with other items added to it), it can really cost much more. To calculate the totals, you can use a credit card calculator.

Now if you only bought the sweater, about \$25 would be due the first month and there would not be much of a cost for using your credit card. But on average, people spend around \$1000 on their holiday spending.

###### Cost of Using Credit

If you put \$625 onto a credit card and pay the minimum payments it will take three years to pay off. The total cost of those expenses is almost \$900. In this case, the \$28 sweater really cost almost \$48. These numbers change depending on the interest rate, how much you pay, and how long you take to pay. But it does help to know how much we are really spending. And that it may take three years to pay off this sweater. There will be two more years of holidays to add in to these costs. If you put it on credit, the cycle begins and the costs get even higher. This is called a debt “snowball.”

###### Paying off the debt

Because of this, it is best to stop the cycle before it begins. Rather than letting your debt “snowball” into a major financial problem, there are several solutions. 1) Pay more than the minimum amount on your bill and when it is paid off, save that monthly payment for the next holiday.

2) Decide how much you will spend for the next holiday, divide it by 12 and save that much each month

3) Decide now how you can reduce your costs this next holiday so that you can catch up on your payments and start saving in the future.

###### If you need more help

If you have already “snowballed” your holiday debt, UF IFAS Extension can help. You can use this qr code or go to: https://fycs.ifas.ufl.edu/financial-counseling/ Accredited Financial Counselors are available to assist you. You can also read more about credit at https://edis.ifas.ufl.edu/pdf/FY/FY106500.pdf

Resources:

There are a variety of sites that provide credit cost calculations, we do not endorse any method but these were provided for clarfication:

https://www.lexingtonlaw.com/blog/credit-cards/retail-store-credit-cards-and-how-they-impact-your-credit.html

hhttps://www.aie.org/resources/tools-and-calculators/credit-card-calculator/

ttps://www.investopedia.com/financial-edge/1112/average-cost-of-an-american-christmas.aspx

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Posted: January 8, 2022

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