Dave Ramsey Has These 3 Tips for Avoiding Holiday Debt

It pays to take this advice to heart.

It's a decision that might seem innocent at first. You're shopping for the holidays when you come across some really good bargains. The only problem is that you've maxed out your paycheck, so any additional purchases you make will have to go on your credit card.

"No problem," you tell yourself. You'll keep your balance small and pay it off once the holidays are over. Only then you end up needing to make car repairs in January, so your spare cash goes to that. And in February, you need to shell out extra money for Valentine's Day, so your credit card balance doesn't get whittled down.

In March, you land in the ER due to slipping on ice -- and the $200 you would've paid toward your credit card balance goes to a hospital copay instead. And in April, you have to buy that plane ticket to see a good friend get married, so there goes any spare money you might've otherwise applied to your debt.

This example really could go on and on. The point is to illustrate that even a small amount of credit card debt accrued during the holidays can turn into a big deal in terms of interest charges if it takes a long time to pay it off. And while you might think you'll pay your balance off quickly, that may not happen.

That's why your best bet is really to do what you can to avoid holiday debt. And financial guru Dave Ramsey has some great advice. Here are his top three tips for closing out the holidays debt-free.

1. Set a budget

Maybe you need $12,000 in savings for emergencies, and your current balance is $12,500. That's $500 you can feel free to spend on holiday purchases. And if you're able to eke out another $300 from your November and December paychecks, you're up to $800. The point is to set a realistic spending budget based on money you actually have. If you pledge to not go over that budget, you shouldn't land in debt.

2. Say no to credit cards

Ramsey is not a fan of credit cards in general, so he'll tell you that your best bet is to pay for holiday purchases using cash only. But actually, there's no reason you can't buy things with credit cards and rack up cash back as long as you can cover your bills in full by the time they come due. So rather than say no to credit cards as Ramsey might want, say no to going above a certain limit on your credit cards based on your budget.

3. Save way in advance

It's pretty much too late to start saving money for the 2022 holidays. But that doesn't mean you can't work on 2023. Once this year's holiday season wraps up, immediately start socking money away for next year so you won't have to even contemplate racking up debt once the 2023 holidays roll around.

Holiday debt has a way of spiraling. And you'd probably rather not start off a new year with a nagging credit card balance hanging over your head. If you follow Ramsey's tips, you can avoid having that happen. You can also avoid the stress, potential credit score damage, and other negative repercussions that come with owing money on a credit card.