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Here's How to Avoid Taking on New Debt This Holiday Shopping Season

The best method for managing your costs and avoiding debt is by understanding your baseline spending

They call it the most joyful time of the year, and for good reason: the holidays are a time to join family and friends and share in the things that make life special. But the celebrations and gift-giving aren’t without cost. According to a recent study from the National Retail Federation, Americans will spend an average of $1,048 over the holiday season, not including the cost of travel. You don’t have to go into debt to afford the holidays.

Here’s how to avoid new debt and bring the true purpose of the holidays front and center.

Review last year’s spending

The best method for managing your costs and avoiding debt is by understanding your baseline spending. And that means taking a look at what you spent last year, in order to understand whether it’s a figure that will realistically keep you from taking on new debt this year. If you took on debt to finance last year’s holiday spending, you’ll probably end up in the same boat this year unless you devise a budget and spending plan now.

In fact, the average American who took on holiday debt in 2018 amassed over $1,200 in debt, according to a MagnifyMoney study. Consider your options for avoiding that situation this year:

Know what you plan on spending, and stick to it. Your budget should take into account what you spent last year and whether that caused you to take on debt. If so, you’ll need to spend less this year (unless you can now cover that level of spending without resorting to debt).

Earmark specific funds for holiday spending. You must identify the money you plan on using to meet your budget. Are you getting a holiday bonus? Do you plan on supplementing your budget with savings? Will you be selling old household items, working a side-gig, or renting out a spare bedroom for extra cash? Whatever the source, it’s important to clearly identify what money you’ll be using to meet your spending budget. Otherwise, you could find yourself again taking on debt at the last minute.

Devise a fall-back plan. If all your best-laid plans fail, you need a fall-back option. Can you take on extra hours at work? Or, can you use rewards points and credit card miles to fund some of the shortfall?

Manage this year’s spending

Devising a holiday budget is one thing, but sticking to it successfully requires some forethought. Here are some actionable tips for reducing costs on some major holiday spending categories.

Choose to fly when it costs less. Tickets on Thanksgiving Day, Christmas Day, or New Year’s for example, can be 50% cheaper than neighboring days. A few years ago, for example, I traveled cross-country on Christmas Day for just over $100. A few days earlier would’ve cost five times as much.

The last week of November and first week of December are some of the cheapest travel weeks. If there’s any way to reschedule your holiday travel to those times, you’ll also get deeply discounted tickets. Free mileage ticket availability is also high at that time.

If you’re open to flying one-way and with carry-on luggage only, websites such as skiplagged.com can help you find cheaper tickets to your location via alternate routings.

Take advantage of Black Friday and Cyber Monday to the max. Sign-up for apps and online mailing lists for your retailers of choice to take advantage of the best deals. Usually, second-generation electronics, technology, and toys are cheapest on these big shopping dates.

Shop resale sites, such as Ebay, shortly after Black Friday and Cyber Monday. Many people will resell items at a deeper-than-usual discount.

When shopping online for large-ticket items, clear the cache on your device and log-on from a coffee shop in a less-affluent part of town. Some retailers price discriminate based on zip code, and lower-income areas may see cheaper prices than affluent suburbs or shopping districts. Even a 10% discount can be significant on a big-ticket item.

Scour every opportunity — some cost nothing.

Many classes of gifts, such as electronics and clothes, are actually cheapest in early to mid-December. Holiday decorations, such as Christmas trees, and food are cheapest right before or on the day of the holiday.

Holiday shopping is also a good use for rewards points you’ve accumulated over the course of the year. They’re hard to trade-in for flights or hotel stays around the holidays, but work brilliantly for online shopping.

And don’t forget that some of the best holiday experiences cost very little.

Baking together, going caroling, or snow-sledding are all beautiful examples of the small holiday joys that make the holidays memorable. When budgeting is essential, steer your friends and family toward experiences, rather than objects.The little habits and celebrations that make your family unique are priceless, and a good place to focus when you’re avoiding debt.

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This story first appeared on CNBC.com. More from CNBC:

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Disclosure: NBCUniversal and Comcast Ventures are investors in Acorns.

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