Manage your holiday money wisely in today’s economy
Many consumers are experiencing an off year due to a “bah humbug” economy, but LSU AgCenter family economist Jeanette Tucker says holiday spending is expected to be up this year. Americans will spend about $688 per household on gifts, decorations, food and other purchases this holiday season, according to the National Retail Federation – a 2.3 percent increase over 2009 sales.
If this amount was put on a credit card at 18 percent interest – and assuming only minimum payments at 2 percent were made – it would take more than six years to pay off the balance. Tucker points out consumers would also pay $485 in interest charges.
“Considering the current economic climate, families are encouraged to plan their holiday purchases more carefully than ever,” she said, advising families to avoid allowing holiday spending to cause their financial security to backslide.
Tucker says it is best to say “no” to gifts and other purchases that you truly cannot afford.
“The greatest gift you can give your family is financial stability,” she said.
From gifts and parties to decorations and travel, the holiday season brings a multitude of financial pressures.
“Don’t let this pressure, often combined with enticing sales and impulse purchases of last-minute items, cause you to lose perspective,” Tucker says. “Remember, spending money you don’t have to save money on a sale item is no savings at all.”
The LSU AgCenter expert offers these tips to manage spending during this holiday season:
•Make a budget and commit to following it. Identify and list all the gifts and decorations you plan to buy, the parties you will attend and the travel expenses you anticipate. Calculate how much you can realistically afford to spend on each of these items. Do not exceed your preset limits.
•Make a gift list and check it twice. Like Santa, list all family members, friends and co-workers for whom you plan to make purchases. Be flexible in cutting the list to accommodate your budget.
•Comparison shop. Consider online shopping to compare products and costs to find the best deals, but be sure to figure in shipping costs. Check sale ads regularly, and be selective in your shopping. Remember: it is the thought that counts, not the price.
Once you have purchased a gift for someone, cross them off your list. Avoid adding last-minute impulse items just to make your gift seem more meaningful.
•Trim your list. To maintain your budget, you may have to cut down your list of recipients and gifts. Discuss alternative options with close friends and family members. Consider drawing names, exchanging “homemade” gift certificates for babysitting, home repair, yard work or other services, sharing a photograph of the gift giver and recipient, substituting “family” gifts for individual gifts, mutually agreeing to limit gifts to something personal, meaningful but inexpensive or even suspending some gift exchanges this year.
You also may have to be selective in the parties you attend. Many people will add substantial costs with other expenses, such as elaborate gift wraps and sending holiday cards. Avoid costly wrapping and consider sending a letter or personalized electronic greeting rather than individual cards.
•Begin saving for next year. Although it may be late this year, remember that holiday spending is an annual expense. Consider establishing a savings account that you regularly contribute to throughout the year. Check to see if your bank or credit union offers “Holiday Club” accounts that allow you to make regular, automatic deposits.
Savings will help reduce your dependence on credit when the holidays roll around. But if you turn to credit cards, be sure to use them responsibly, Tucker says.
Designate one card to use for holiday shopping and leave the others at home. Be sure to select a card with a low interest rate – check for zero percent interest offers. Finally, keep a record of all expenses and stay within your budget so you can pay off the bill when it arrives in January.
“Remember, those ‘bargains’ that are so tempting in the store are not really bargains if you end up paying interest on them,” Tucker says.
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