Did you know that every year, $121.4 billion is spent using credit cards from the time between Thanksgiving to Christmas? Chances are that you too are one of those people. If you are, do not let yourself get buried by this holiday debt or get yourself to spend the next months paying off all your purchases from this year’s holiday season!

Although it has been a tradition in western culture (especially) of hundreds of years to buy gifts for Christmas, forcing yourself to hold on to this tradition when you don’t really have money to spend, is very silly. In this financial crisis, I believe, people will come to the point where they will be happy enough to have food on the table on holiday at all, and not even think of getting gifts.

But for now, if you really think you still want to do your favourite shopping of the year, you might as well follow these steps to do it wisely and stay out of holiday debt.

1) Budget Your Spending

Before you rush out to the mall, sit down and count your cash. How much money can you afford to spend this year? Decide on this first and later in step 1 you will write down a list of the gifts to get for your loved ones along with the maximum amount of money you can afford to spend on each gift. This is obviously the most important step.

Planning in detail every gift for the person you’re going to buy them for will help you control your spending – so long as you stick to the plan. Here is an easy to use spreadsheet that I found in the internet for you to use to plan your holiday spending. Click here to download.

The average amount that people spend on gifts is $1,000. But it may be (of course) different with your situation. Just remember, that it is not the amount of money you spend that counts. It’s just very important for you to recognize your own holiday spending limit! How much are you going to spend this year? $500? $1000? $1500? Write down the limit of your spending before you go to the next step.

Think also how much are you going to spend using cash? And how much using credit cards? If you are using your credit card again, think of how much money you will have available to pay when the bill arrives in January?

2) Use Your Spreadsheet

Download your free spreadsheet here.

Now that you have your own spreadsheet to plan your shopping, and a general idea on the dollar limit that you are going to spend, you can start making your shopping list. Here is how use it:

The list has a column for the person, the gift description and the cost. The star column tells works as a ‘To-Do’ list. If you see a star by a person’s name, it means that you still have not bought a gift for them and that is something that needs to be done. If you have purchased a gift for them, enter a number in the “True Cost” Column and the star will disappear.

First, write every person that you need to buy a gift for. If you do not have Excel, you can create a list by hand. Estimate how much you can afford to spend for each person and enter your number in the “Estimate” column. You do not have to type the “$” sign as it will automatically appear when you enter the number.

After you have finished estimating each gift for each person, check the total estimate amount. This total should not be more than your holiday spending limit you have set in step 1. If it is more, you will have to go back and make adjustments.

When you have made that adjustment, you are ready to go shopping. Do not forget to print out this list and bring it with you. Refer to every estimate every time you see something that you are going to buy. Do not buy items that cost more than what you estimated. This way you will not go beyond your holiday spending limit.

Every time you purchased one item, write down the actual cost of each of them. When you get home, update the “True Cost” column and type in the true prices of each of the items. You will then see how much money you have saved if you had stick to the list.

3) Decide Whether To Pay Cash Or By Credit Card

Personally I believe that paying cash is the best policy. But there are several advantage that you might be able to benefit from by using credit cards. But this also depends on your credit card provider. Here are the few benefits of shopping using credit cards:

-  Interest-free grace period

- Purchase protection (ability to do chargebacks)

- Building credit worthiness

- Automatic extended warranties (on some cards)

- If your cash is stolen, it’s gone! If your credit card is stolen, and you report it right away, you don’t lose any money (or at least a limited amount).

- You may be able to get additional discounts.

- Rewards such as rebates and other perks.

Remember that it is not the credit card spending that gets people into trouble. It is the “spending” itself. If you have made your holiday spending budget and promise to yourself to stick with it, it does not matter whether you are going to pay it by cash or by credit card. As long as you stick with your budget and you pay your credit card bills on time, you will have no problem in the future.

4) Pay Off Your Credit Card In Full

Since you had stick to your plan, your credit card bill does not exceed the limit of your affordable holiday spending budget. This means that you should be able to pay the bill off in full. But if for some reason, you can not pay it of in full, it is best that before you go shopping, you call your credit card provider and do step 5.

5) Find Creditors With Better Deals

Sometimes, something delays your ability to pay your credit card in full. This is why (before going shopping) you have to use credit cards that give you a few months without interest on purchases. This way you have a little more time to pay off your bills.

Call the bank and ask them to give you a deal of 0% for 6 months on holiday purchases or you will be using another card who will give you the deal. Try it out and see if it happens. If the bank does not give you this, then go to another bank and do the same. There is a 50-50 chance that the bank will give you a deal and if you don’t, just use another card.

6) Use This Trick On Discount Cards

Many department stores offer discounts if you use their card. If the stores have something that is on your holiday shopping list, take the card for the discounts and as soon as you get home, before any interest is charged on you, transfer the balance to your own card that has a lower interest rate! The key here is to be quick enough to transfer the balance before they charge you with interest.

If you seriously go through each step above, you will see that you can save a lot of money!

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