It’s a piece of seasonal irony: Consumers need to be more like Santa if they want to survive Christmas with their budgets intact.
“Like Santa Claus, we should be making a list and checking it twice,” said Robert Baker, education coordinator for the non-profit agency, Housing and Credit Counseling Inc. “That means we should be making a list of the entire cost of Christmas and that would not just be gifts.”
Foods and beverages for parties, entertainment, Christmas cards, postage, wrappings, tree trimming and other expenses also need to be factored into the total.
“The thing is, if you make a list in advance and you try to set yourself to a cash budget, it’s a way to limit credit card spending,” he said. “...You’ll reduce spending over the holidays. You don’t want to get a present in January that’s red ink.”
In an ideal world, January would be reserved for making the list, then checking it through the year to match gift needs with advertised specials.
Karen Sommers of ESB Financial emphasized planning — and sticking to the plan — as a key aspect to controlling expenditures.
“Was it Benjamin Franklin who said, ‘If you fail to plan, you plan to fail’?” she said. “It’s like anything else, like doing a budget for your groceries and sticking to that. We always get in such a rush that we fail to plan.”
Sommers said that saving small amounts regularly through the year is a painless way to have cash available at the holidays. Banks and credit unions have interest-bearing savings clubs for such purposes, and self-disciplined savings also is an option.
This season, however, shoppers will need to rely on other options to make it through the holiday financially unscathed.
“This is a good time to involve the kids in family spending decisions and teach them about spending,” Sommers said.
Pre-paid credit cards are a convenient way to limit spending, both for adults and for children who want to shop for gifts on their own.
“If you prepay for $500, it’s going to let you charge up to $500 and then your card is not valid to charge on,” Baker said. “You have no ‘holiday hangover.’ You’re not going to have late fees, overcharges.”
Watch for half-price and 2-for-1 sales on items like cards, gift wrap and ribbons, tape and holiday decorations that, totaled together, can erode the gift budget.
Taking a look at other ways to give gifts also can be beneficial.
Baker asked, “Do you have to buy a gift for everyone? ... Can you have a gift exchange” by drawing names at work or at home?
Holiday parties and get-togethers can be turned into cost-cutting potluck events, with the host providing a main course and guests bringing side dishes or hors d’oeuvres.
“Regifting” is another avenue to maintaining the budget.
“We all get gifts that aren’t appropriate for us, but we all know someone who would like it just fine,” Baker said.
Gift cards are the fastest-growing present in America, and with good reason, he said. They are opportunities to contribute toward a gift someone truly wants without going into debt to buy an expensive gift, or one that isn’t quite what the recipient wanted.
“Twelve billion dollars’ worth of gift cards will be bought this year,” Baker said. “It’s going to be good currency ... and you’re still limiting yourself to a purchase you can afford.”
Laying away merchandise also can make purchases more affordable, though stores are slowly discontinuing that service.
“If you had to buy something that wasn’t in the budget, it might be cheaper for you to pay for it once a week than all at once,” Baker said.
Deferred-payment plans, such as “90 days, same as cash” are good until they backfire.
“If you don’t pay them off in 90 days, they’re going to charge you interest — on the full amount, plus the interest that they’d tabulate from Day One,” Baker said.
When credit cards must be used, Baker said to handle them carefully to avoid identity theft or unexpected charges.
He said that “shoulder surfing” has become an easy way to steal.
“You’re in the checkout line, ready to use the card, the person behind you has a cell phone, ‘surfs’ over your shoulder to take a picture so they can use your card later on,” he said.
He also cautioned that some thieves have electronic card readers that can read from 10 to 20 feet away.
“Limit that credit card use and make sure you have a plan to try to do everything on a cash-only basis,” he advised. “What gets people in trouble is the buy now-pay later approach. You’re going to get in a whole heap of trouble real quick.”
More information about calculating credit card debt payoff, managing resources, speeding-up repayments and other topics is available at HCCI’s interactive website, www.hcci-ks.org, or by calling 342-7766. Information also is available at the American Financial Services Association Education Foundation website, www.afsaef.org.
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