This post is in partnership with Lexington Law, thank you for supporting brands who support TCM. As always, all thoughts, opinions, experience, and advice is my own.
It's the most glorious time of the year! The holidays always feel like they have a little extra excitement in the air, don't they? It can be easy to get caught up in the holiday cookies, movies, festive parties, and traveling to see loved ones. All of that isn't an excuse though to let your finances fall out of whack. The holidays don't have to be your financial downfall. In fact, with a little preparation and knowledge you can make this season (and every season thereafter) the best yet with some new habits!
What You Need To Know & Do To Get Your Finances Ready For The Holidays
Have a holiday budget
Ideally you'll already have a regular budget in place that you just need to revisit and tweak for the holidays. However, if you don't have a budget in place now is definitely a great time to sit down and make one. Figure out what you'll need for travel, gifts, charity, food, decor, etc. Mapping out what you want to do is a great place to start. Make sure to revisit it though and see if you can cut anything out or down. A lot of times you can find discounted gift cards or lower food costs by doing potluck festivities instead of everything yourself.
Beware of holiday scams
Listen, even the best of us can fall for scams. The holidays bring out a super charitable mood for many, and scammers know that and go so far as creating fake charities. Scammers also know you're about to click any store email that has a great deal to browse and have gotten pretty creative with how they mask them to consumers. You can read more about scams to avoid during the holidays from my friends at Lexington Law here.
Protect your identity
Do your best with this and be smart. For instance, when checking out online make sure the website has the little lock next to the URL to ensure it's a secure check out process and reduce your risk of identity theft. If something doesn't look right at the gas station or ATM when you go to enter your card, go inside to clerk; it's better to be safe than sorry that you were a victim of one of those credit card skimmers.
At the end of the day identity theft has gotten much more advance with the rise of technology. Some scammers can simply sit in the mall with a device and if you happen to walk in their radius, they have access to all your cards information in your wallet (a reason many are opting for RFID blocking cards in their wallet today, read more about them here).
No matter how safe you are though, there's still a chance you'll be a victim of identity theft during this fast pace time of year and with technology always changing. Consider signing up for the Lex OnTrack Identity Theft Protection Tool by Lexington Law. It’s a monthly subscription service that combines Lexington Law’s credit repair services with identity theft. It allows you to track your FICO® Score, has dedicated US-based customer support, and tons of other tools to help you manage your finances! It monitors your identity 24 hours a day, 7 days a week, and will alert you of any suspicious activity; which is super helpful come the holidays, you don't need to be worrying about your identity too! To make it even better, they provide $1 million in identity theft insurances which includes any stolen funds and cash reimbursement. If you are a victim of identity theft, Lex OnTrack will aim to prevent it, but also helps remove any questionable negative items from your credit report.
Start comparison shopping as early as possible
If you caught my video on money myths you need to forget ASAP, you know that the sales price is often not the lowest price. In fact, in the video I talk about how during the holidays, a lot of retailers will actually raise the regular price of an item, and then put a sales sticker on it dropping the price back down to what it typically is all year round! Start setting up alerts or watch lists to track the items on your holiday wish lists so that you can be an informed shopper. Also make sure you understand a stores return and price matching policy. It's okay to spend a little extra and find a better deal later on as long as you're protected and can get the price difference back one way or another.
Understand your credit score and keep it in mind
The holidays can be a great time to pull out your credit card and earn some rewards points. However, for many this time of year can also be a great time to destroy your credit score. So when it comes to your spending make sure you understand how your credit score works (I break that down in detail here), and keep it at the front of your mind. The big things to remember though, are paying off your balance in full for each billing cycle (it's the heaviest weighted factor of your score) and to keep your credit utilization ratio down.
Meaning, don't max out your credit cards. Instead try to only charge about 30% of your available credit limit and only charge what you can pay off in full. If you find you're going to go over the 30%, it's okay, just pay your credit card weekly instead of waiting for the monthly bill to keep the utilization ratio down. Remember, it can take years to build up excellent credit, and seconds to destroy it. If you're struggling with your credit score, don't forget to give yourself a gift this year and consider enlisting the professionals at Lexington Law to help you get things where you want them and kick off the New Year on a high note!
Feel empowered, not pressured, when it comes to opening store cards
Inevitably during the holidays, every time you check out you'll be tempted with a great deal to open a store credit card for a large percentage off your purchase that day. While it's tempting to save the money upfront, consider whether it makes sense for you in the long run. Every time you open up a new line of credit (whether that's a loan, credit card, store card, etc.) it acts as a hard inquiry on your score. Depending on where your score is at, it can drop you as much as 100 points (it's a weighted scale, so if you're in the excellent range you'll feel it more than if you're in the average range with your credit score).
Now a dip in your credit score is never fun, but hard inquiries can be easy to recover from. They fall off after 2 years, and your most recent behavior becomes weighted heaviest (meaning if you're paying your balance off in full every month and keeping your credit utilization ratio down, you may not really notice a big difference). Also consider whether you need your credit for anything significant in the next year. If you already own a home and are set on a car, a small dip in your score won't really matter.
However if you open up 3 store cards and then need to go apply for an apartment next year, it could seriously hurt you. Knowledge is really power here and understanding whether it's worth opening a store card. Lastly, make sure you go home and pay off the store card the day you charge for it. Store cards also get a bad rep because they have crazy high interest rates and people open them, and then forget to pay them since it's not in your regular rotation. Not exactly a winning combo.
Getting Your Finances Holiday Ready
Remember, knowledge is power, especially when it comes to your finances. The holidays don't need to be a stressful time. If you're working off a budget and focus on protecting yourself you can get through the season with ease and kick off the New Year strong!