With a week until Christmas, holiday shopping is in full swing in Indiana and around the country.
The average American will spend a little more than $700 on the holidays this year, between gifts and decorations, according to the National Retail Federation.
However, with nearly two in five households living paycheck to paycheck, often that’s money they don’t really have, warns Ellen Harnick, senior policy counsel at the Center for Responsible Lending.
“Anyone who you love enough to be out there shopping for a gift for does not want you to take on a debt obligation that’s going to put you in financial peril for the rest of the year.”
Harnick says it’s important to set a reasonable budget and stick to it, rather than run up the credit cards to buy gifts. She says one in eight Americans has more than $10,000 in credit card debt, and soon realizes that it’s a hard cycle to get out of.
Harnick also warns against opting for payday loans, which can keep a person on a financial treadmill for months. “Getting the loan, even at a rate charged by a finance company, can set you on a cycle where it’s very, very hard to dig out.”
The rates charged by payday lending companies can be as high as 400 percent. Harnick recommends spending within your budget this year and, starting in January, putting away money each month to fund your 2013 holiday spending.