My Wish for Future You: Happy Holiday Shopping and a Debt-Free New Year

Greetings! I’m excited to introduce my new credit advice column with a special challenge. One I know you can meet: changing the way you use credit cards.

The timing is perfect.

The winter holiday season is here, so how you spend and borrow from this point forward will be exceptionally important.

An array of money traps are before you at this very moment, and all can lead to a painful, and lasting, debt hangover.

The weeks from mid-November through December are filled with potential expenses that tend not to come up at any other time of the year.

If you spend and charge the right way, you’ll celebrate the New Year without having to deal with excess bills. Pop the champagne; you did it! Do so the wrong way, though, and you’ll start it out with a heavy financial weight dragging you down.

How you charge is totally up to you.

Of course, it can feel like you’re obligated to spend on a variety of things that aren’t within your normal budget. While a little extra spending may be necessary to keep good relations and have a great time, don’t overdo it out of guilt or outsized expectations (other people’s or your own).

This is your story. Write it as you want. 

Picture yourself sometime in January. You’re checking your credit card statement. What you did just weeks ago will be right there in black and white.

For example, maybe you spent $800 on travel, $200 on home decor, and $500 on gifts. You went out for meals with friends who came in from out of town, adding $300 to the equation. New clothes for the party cost you $150. Scanning those line items, you see the final number. A balance of around $2,000.

You feel awful. Now you have to pay it back.

What will you do? You check your bank balance. If you have enough set aside and can pay it all right away, great. Done. If not, you may be able to chop it up into installments of about $525 per month, to be in the clear by May. With an APR of 25% the total interest paid would be roughly $100. 

But maybe those charges were piled onto an existing balance. Now you owe $10,000, and your card is maxed out. You’re overwhelmed. There’s not nearly enough cash left over after meeting your regular bills to zero out that debt, so you send the minimum requested payments. 

You also know that, because interest is high, it will barely make a difference. 

If only you could go back in time.

You can, by making sure that future doesn’t come true. Rewrite the story with a far happier ending.

Review how much money you have in your checking and savings accounts, then look at your credit card accounts. At this moment, decide the amount you will spend, which card (or cards) you will use, and how you will effectively manage the resulting bill.

Make a resolution now to ensure future you doesn’t get stuck with debt. If you do, you can rewrite your holiday shopping story with a happier ending.

Now, imagine you’re packing away all your holiday decorations. You feel amazing and light. No financial pressures. Sure, you used your credit card, but you paid it all off quickly.

Even better, you profited from the process. Maybe you charged $2,000 to a cash back credit card offering 2% back on everything, thus earning $40. Or you used a card offering 5x the miles on all those expenses. Now you have somewhere between $100 and $180 in redemption value.

In other words, instead of the holidays turning you backward, this year you went forward. Wow. What a difference.

Can you do it? Will you do it? Let me know, and ask any questions. This column will be about you. I want you to succeed.