Wise Holiday Spending

Money: How to avoid debt this shopping season

The holiday season is a time of parties, decorations, gift giving — and debt.

Unfortunately, long after the snow has melted and the trees sprung back to life, many people will still be paying off the credit card debt they used to buy yet another sweater for their father and a George Foreman grill for that tough-to-buy-for uncle.

Last year, the average American spent $1,558 during the holiday season — and that was with consumers worried about the economy — according to the International Mass Retail Association. Now, spending that amount of money on gifts and parties would be just fine if we all had $1,558 stashed away for the holiday season. But, of course, most Americans don’t have a special holiday fund and end up spending more than they have in their bank account.

So how do consumers square the circle of spending more than they have? Why, credit cards, of course. (By the way, anyone who didn’t know the answer to that question should really consider giving up their American citizenship and moving to a more responsible country, like Japan.)

Debt counselors say that many of their clients are still paying for Christmases past — many years past. Like some warped version of A Christmas Carol, people are being visited by the ghosts of Christmas past, except, in this case, the ghosts are demanding a check.

Remember, it doesn’t do you much good to shop for Christmas sale items if you’re going to rack up long-term credit card debt to buy them.

For example, suppose you ran around the outlet malls searching for bargains and were able to buy $1,100 worth of gifts for $1,000. But you put the $1,000 on your credit cards, and it took you until next Christmas to pay it off. If you had a card that charged 18 percent, you would end up paying nearly $100 in interest, wiping out any savings from buying the gifts on sale.

Here are some tips to avoid a holiday spending hangover:

  • Create a budget. When you go to buy a car or even consider going to a restaurant for dinner with friends, what’s one of the first things you think about — or, at least, I hope you think about? “How much do I want to spend?” The holiday season should be no different.

    Take five minutes and think about this question: How much money seems like a reasonable amount to spend on gifts, decorations and hosting parties this year. Whether you answered $100 or $10,000, you now have a general budget to work with while shopping this season.

  • Make a list. Even Santa Clause knows that you need a list of people who will get gifts and what those gifts are. Remember folks, when it comes to holiday shopping, it’s us against them. Every time you step into a mall or department store, you are being hit with millions of dollars worth of marketing research designed to get you to buy things you don’t need or want. Without a list to keep you focused, you don’t stand a chance.
  • Pre-shop. The Internet provides a great way to compare prices without the temptations of the mall. Searching for bargains online can save time and money on both gifts and gas.
  • Start and finish early. It seems that no matter how many times people promise that they won’t wait until the last minute, many shoppers find themselves at the mall a day or two before Christmas. Last minute shoppers pay the price for their procrastination in several ways. They don’t have the time to look for sales, to be selective or to compare prices. Of course, last minute shoppers also pay a price in terms of their sanity as they fight through the crowds of frantic shoppers.
  • Don’t buy for yourself. I realize this may not be the most popular advice to give, but it has to be said. It’s the time of year for giving to others, not yourself. However, if you have been good and stayed within your holiday budget, you can — and should — reward yourself by buying a few items in the waning days of the season or the day after Christmas when stores often offer some fantastic prices.
  • Pay cash. As noted above, using a credit card to stretch out paying for your holiday spending over the following year can end up adding 10 to 20 percent to the cost of a gift purchased.

Following these tips will help you have a merry — and affordable — Christmas.

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