Smart Spending Puts Holiday Shoppers in Control of Cart

If you aren't smart about holiday spending you could find yourself in trouble before the icing dries on the cookies.

A quarter of this year's holiday shoppers say they'll pay cash for gifts this year, according to the National Retail Federation's 2009 Holiday Consumer Intentions and Actions survey; 42.5% plan to pay primarily with debit or check cards.

"Even though consumers have good intentions, I have to wonder where the money is coming from," says Gail Cunningham, vice president of public relations for the National Foundation for Credit Counseling, (NFCC) Silver Spring, Md.

And although the national savings rate is up for the first time in years, Cunningham hopes shoppers don't plan to pull cash out of their emergency savings funds. "Christmas doesn't qualify as an emergency," she points out.

"While the holiday season is known as a make or break period for retailers, it's the same situation for many Americans who are already struggling to make ends meet," Cunningham says. "Spending during the next two months can make or break them financially, with the ramifications of poor decisions following them for months or years."

Make a plan

You can avoid financial mishaps by using simple spending strategies for this year's shopping season, according to the Consumer Federation of America and the Credit Union National Association's 10th annual holiday spending survey:

Total expenses for expected holiday spending. This includes gifts, travel, parties, gift wrap, food�any expenses that you'll incur. Divide this number by 10, Cunningham says, and save that fraction each month. You'll have 10 months worth of savings�January through October�by next November when you're ready to shop. A great place to save for next year's holiday expenses is in a holiday savings account at your credit union.

"The goal," Cunningham says, "is to have cash in hand to begin holiday spending and to give yourself the best gift�debt-free holiday spending next year."

Create a spending plan. To track expenses you need a budget: Who are you buying for? How much will you spend on each individual? Have specific gifts in mind.

Shop before leaving home. Comparison shop online to find which stores carry the items you're looking for and the best price. Flag items in flyers and catalogs and bring them with you to the store.

Take frequent breaks to survey the damage. "If you've overspent on Uncle Harry, cut back on Aunt Hazel," says Cunningham. "It's not a gift to anyone to dig a deep financial hole. Have a list and ideas and get in and get out�sort of like you're on a reconnaissance mission. Shop with your head, not with your heart."

Limit time at the mall. Shop during lunch hours or during your child's basketball practice so you don't have "too much" time.

If you use a credit card, be committed. Ideally don't charge more than you can pay off when the bill arrives, says Cunningham. If that's not possible, don't charge more than you can pay off in the first quarter of 2010.

Creditors have changed card terms and access to credit is tight. For the best rates and fees on credit cards and for the fairest terms, check with the lending professionals at your credit union.

Beware store cards. Chances are, if you wanted a specific store card, you'd already have one, says Cunningham. These cards generally have higher interest rates than general use credit cards.

Disregard "buy now, pay later." It's easy to bring a big purchase home without much thought when you don't have to pay for it for six months. Be cautious: If you don't pay off the item by the due date, you'll be socked with outrageous interest expenses.

Get a grip

Here are some fun ways to manage holiday spending:

Make your own gifts. Beyond basic baked and craft items�still great ideas�there are many inexpensive ways to create unique gifts. For example, Cunningham says, "I have a friend who last year made a scrapbook for her father full of family photos throughout the years. Her father said it was the absolute best gift that he ever received."

Another idea is to purchase an inexpensive digital photo frame and upload photos of the kids for grandparents and other close family members.

Shop after Christmas for next year's gifts. You can hit some great sales; just remember where you hide the items.

Host a family or support a charitable function such as a "Giving Tree" at church or work. You'll stick to a price range, but you're also buying for someone who really needs and will appreciate your gift. These charitable activities also are great teachable moments for kids.

Make a donation in someone's name to an organization of that person's choosing. "But be smart about charitable giving," advises Susan Tiffany, CUNA's director of consumer periodicals, in Madison, Wis. "The economy has many charities ramping up their seasonal pleas; you can make contributions and be confident they are benefiting intended recipients by checking the Better Business Bureau's site."

It's not a gift to anyone to dig a deep financial hole.

"Giftpool." For big ticket items, consider pooling resources and making the purchase with others. This works great for those pricey electronic devices or other gizmos that kids want.

Give gift cards. If you're attentive to details, for example expiration dates and fees, gift cards can be welcome gifts and you spend the amount you intended to.

If you need help with a holiday spending plan, talk to the professionals at your credit union. Or, contact the NFCC. To locate the NFCC affiliate nearest you, call 800-388-2227, or search online.

Published November 23, 2009