What is it about the holiday season that pushes so many of us into debt, despite our best intentions. A bottled-up urge to spend? The need to be seen as good and giving? The desire to reciprocate?

It appears that some good has come out of the pandemic; credit card debt has declined. It is a good augury for the season ahead, in a way. People are becoming conscious of the need to be prudent in spending.

What can you do to avoid the holiday debt trap?

1.      A budget is a good starting point

This is really a financial management 101. If you can reasonably accurately project your receipts and payments, for the holiday period and a little beyond, it gives you a head start. Now you also have a history, of Christmases past, not of Ebenezer Scrooge, but your own spending, or mis-spending, that can form a good starting point for the holiday period budget for this year.

2.      Cash spending reduces the spend rate

Many studies have found that buying in cash reduces the amount of spending. Credit card issuers try to convince you to swipe the plastic more and more by giving you rewards and incentives, but if it ends up as unsettled bills and attracts the high rates of interest that cards charge, it ends up as a financial loss. Hence, purchases in cash could be a good way of limiting the expenses, even though they may sound old fashioned.

3.      Use accumulated rewards

If you have been using the credit card, whether by falling prey to the devices of issuers, or otherwise, you would have collected reward points that all cards give, as a way of getting you to spend more. This is as good a time as any to encash those accumulated points and use them for purchases, instead of spending more and increasing the borrowing in the hope of collecting even more rewards.

4.      Set expectations with friends and family members

You are probably going to buy gifts for people close to you. It is inconceivable that they would be the people who would wish mounting debts on you for the joy of receiving gifts during the holiday season. In many cases they are also going to get you a gift. It is becoming a popular practice to set mutual expectations for the value of gifts exchanged.

5.      Understand your Credit Card

As you may need to swipe it many times, it is a good time to spend a few minutes to understand your cards, so that you don’t make silly mistakes. Make sure you know the credit limit as you don’t want to end up paying penal interest rates by exceeding it. Features like ‘price protection,’ that give money back in your account in case the price reduces, can help you save a few dollars too. Activate them if activation is needed. Read the fine print before using the ‘freebies’ offered by issuers.

6.      Make your own gift and focus on togetherness

Many of us have a creative spark. In a commercial age, where all that is needed to buy a bigger and bigger gift being money, a personalised, hand-made gift may be valued by many of your near and dear ones. It could even be as simple as baking a cake.

It does not even have to be something that has a value in cash. Getting together and doing things together might eventually be more valuable than gifts money can buy.

7.      Achieve your goals, not that of businesses

It is the job of businesses to create happiness for themselves in the only way they know, by getting you to spend more. Making them happy is neither your primary, nor secondary or tertiary goal in life. Your goal, at least one of them, is probably to make yourself and own near and dear ones happy. Focus on achieving your goal, not that of the sellers.

Time for a rethink?

If it helps, many people feel the pressure to ‘perform’ during the holiday season. You are not the only one. We will all act according to our budgets and needs and compulsions, but could you be the one to relieve the pressure this year? Could you be the harbinger of change? That could be a huge gift in itself.

When the joy of gifting is overshadowed by the worries around mounting debts and bill payment, it is probably time to look for a better way.