As the year draws to a close, if you’re like most students you’ll soon be preoccupied with late night cramming sessions, finals and term papers. And, with the holidays around the corner and the season of giving approaching, Madison Avenue will be encouraging you to buy lavish gifts. Unfortunately, it’s all too easy to ring up both the cash register and credit card debt. That’s tough when you’re a student on student loans with a part-time job. Best advice: don’t buy anything you can’t afford. If you ain’t got the moolah, just don’t buy it. Instead, put some thought into what’s truly unique about each friend and family member. You’ll be sure to come up with memorable gifts that don’t put you into debt. Or, if a ski trip is what you’re after, my advice is earn the bucks first, then go party.
I suggest you approach the holiday gift season with a budget (yes, the “B” word). Evaluate how much cash you have in the bank (note, I said cash not credit), and then set a spending limit. One way to do this is to plan how much to spend for each person on your gift list. Since the actual amounts spent may vary somewhat, be sure to also set a “not to exceed grand total”. Try your best not to exceed the grand total limit you set. Watch out especially for impulse purchases or seemingly trivial purchases. Six small purchases at $10 each can add another $65 (tax included) to your bill.
If you do choose to incur credit card debt (hopefully, he/she is really special), be sure to pay off the credit card purchases on time to avoid late fees. Just one late slip can place a black-mark on your credit history, which could lead to the credit card issuer raising your interest rate.
When it comes to paying off the debt, you must pay the minimum amount. Better yet, pay off as much as you can afford because just paying the minimum can be deceptive. Here’s a little math courtesy of bankrate.com: If you try to pay off a $1,000 debt on an 18 percent card by just paying the minimum each month, it would take more than 12 years to repay. Honestly, do you still want to be paying for Auntie Emma’s Christmas slippers when you’re 30?
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