Holiday Spending Tips

It seems like the holidays are always "just around the corner." The stress the holidays inevitably can cause is usually based on how prepared we are financially to make it through without getting further into debt. We hope these tips will help you keep your holiday spending in-check.

Avoid using credit cards and charging your way through the holidays!

Avoid using credit cards at all costs unless you plan to pay the balances in full when you receive your statement. When you use credit, you pay interest for the amount you charge. For instance, let's say your holiday shopping costs you $2,000. If your account had an 8% interest rate and you paid the minimum payment due, it would take you approximately 18 years and cost you over $5,600 to repay. (Check out this article on credit card minimum monthly payments).
Draft a holiday budget by starting with a realistic idea of how much you can spend on gifts, food, travel and other items. Tally it up and think hard about whether you can afford to spend that much. If the total figure makes you uneasy, think about areas in which you might cut back. Then stick to your budget.
Look at your financial situation. If cash is low and debt is high, scale back your list.
If you have a Holiday Grab Bag at work, establish a set limit on the cost of gifts.
Have a "family gift lottery." Enter the names of all the people in your family into a hat, then have members pick out a name and buy a gift for that person.
Stick to your gift list when you shop, and avoid impulse purchases.
Evaluate your personal gift list and get creative. Try limiting your gift-giving to family and close friends. For those not on that list, consider sending a personalized holiday note, card or e-mail.
Sometimes shopping late can be to your advantage. The week before the holidays, merchants may begin marking down their prices.
Making your own gifts for friends and family not only saves you money, it also adds to the spirit of the season.
Open a "Christmas Club" account in January. Many banks and credit unions offer these accounts. Base your account needs on the amount you spent this year for the holidays. You can even arrange to have that amount deducted from your paycheck.
Refrain from tempting yourself and avoid those "extras". Sometimes the little things can really add up.
Shop early to avoid expensive express deliveries. E-mail holiday greetings to save paper and postage.
Debit cards. A debit card is good if you prefer not to carry cash or write checks, but carrying a debit card is like carrying a checkbook full of signed checks. Take extra caution with it. Purchases made with a debit card are withdrawn directly from your checking account.

We don't advise the use of credit cards, but if you absolutely need to use credit for last minute gifts and you don't have cash on hand:

Be sure to analyze the credit cards you have and only use your lowest rate credit cards. Keep a tally of expenditures as you go, retaining all receipts.
Unlike typical credit cards, department store charge cards carry extremely high interest rates. Consumers should avoid using them if at all possible, unless you can pay the balances in full when the bill arrives.
Don't take credit card cash advances. There is a fee (generally 2 to 4 percent of the total amount of money borrowed), and often the interest rates on the borrowed money are higher than rates on regular credit-card purchases.
Don't use home equity loans to pay your holiday bills or credit card debts. Taking out a home equity loan to consolidate your debts could easily put you in a bad financial position. If you can't pay back the loan, you could lose your house.
Seek help if debt is a problem. If you have trouble with your debts, learn more about the benefits of credit counseling here.