Thursday, October 27, 2011

6 Steps to Skirting Holiday Debt

While the holidays are no doubt a time to celebrate with friends and family, there is such a thing as too much holiday cheer. In fact, last year the Consumer Reports Holiday Shopping Poll found that 13.6 million Americans are still juggling debt from last season after getting a little too into the gift-giving season.

To spare consumers from suffering the same fate in 2011, MainStreet talked to budgeting experts about the steps you can take now to make sure you don't accumulate too much debt come January.

Consider Hidden Expenses

"Planning for holiday spending should follow the framework you use for your overall financial life," says Suzanna de Baca, vice president of wealth strategies at Ameriprise Financial. She suggests consumers write down all of their anticipated expenses before setting a budget, though this written game plan should address more than just the gifts you plan on giving.

"Holidays are so much more than that," de Baca says, adding that consumers should consider including travel, food, parties and clothing for said parties to their list of expenses. Once you do this, you can prioritize spending and budget for each event you need to attend/throw in addition to each person you need to shop for, decreasing your chances of spending more money than you can afford.

Pursue All Shopping Alternatives

"It's important to start thinking about [holiday shopping] early," Clarky Davis, spokesperson for CareOne Debt Relief Services, tells MainStreet. She says that thinking about shopping options in the fall or even summer months can help consumers find cheaper gift alternatives. For instance, they may have time to visit thrift stores, other secondhand shops or off-price retailers to find low-priced designer items or brand names.

De Baca suggests looking into homemade gifts and considering buying things in bulk. For instance, she says "you can buy a case of wine" instead of heading out to the liquor store right before each holiday party you attend.

She also says you can make charitable donations in a person's name in lieu of gifts, since you don't have to assign a dollar amount to the gift.

Eat Out Less

A few months before the holidays, you can cut out certain expenses in an effort to save. One easy expense to cut out is your inclination to frequent restaurants, especially given all the holiday parties you'll be attending in November and December.

"Eating at home is a time-tested way to hold onto your dollars," says Kevin Gallegos, vice president of Freedom Debt Relief. "Funnel the savings to repay credit card or other debt or build a nest egg."

Don't Shop on an Empty Stomach

Once you are ready to hit the stores, you should be well-rested, well-fed and not in a rush to go anywhere else.

"When you're tired, hungry or rushed, you make snap decisions," Davis points out, and these aren't always good for your wallet. She suggests heading out early in the day or, better yet, before the season is officially under way, since you're less likely to be enticed by the holiday décor or purported discounts retailers advertise at the height of the holidays. What other factors can negatively influence your spending?

Put Away the Plastic

As much as it pains this reporter to admit it, you might want to go easy on the old credit card in the months leading up to the holidays.This is because, as de Baca puts it, a credit card "is the fastest way to get in an overspending situation."

"It's easier to stick to a budget if you only pay with cash," says Andrea Woroch, consumer savings expert for The Frugals, a network of savings websites that includes "Even debit cards make it easy to overspend, a fact that likely won't hit you until the monthly statement arrives. Having to part with actual greenbacks makes it much more real."

Go Easy on the Gift Cards

You also might want to skip out on overloading your shopping cart with gift cards, no matter how popular an item they may be. This is because gift cards proudly advertise just how much the purchaser has elected to spend on the recipient, and people may opt for a higher-priced piece of plastic in an attempt to not look cheap.

"[Consumers] may spend $25 instead of $20, $5 more than they intended to," Davis says. Instead, electing to buy a small gift without the price tag on it will help you stay within your allotted budget.

This article is part of a series related to being Financially Fit

p/s: Nape aku share pasai nie?? Yela kan sekarang AirAsia sangat mesra tiket. Dia rajin bagi rakyat Malaysia melancong.. So aku kongsi la tips2 untuk korang2 ngan diri aku sendiri gak (=

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