Say "Bah, Humbug!" To Holiday Debt

Ah, the holiday season! Turkey and dressing, pumpkin pie, Santa hats, jingle bells, and lots and lots of eggnog make the season a delight. But all fun and reindeer games aside, you have to be careful to make sure you don't wind up as poor as Tiny Tim! Americans can spend as much as $1,000 a year on gifts for family and friends. That is a big chunk of money that can hit you pretty hard come January, but only if you don't plan ahead. There are some tips and tricks you can do to keep your holidays bright and debt-free this year.

Before the holidays arrive, do some careful plotting and planning. A few hours spent in preparation can mean less money spent on gifts. You don't have to be Scrooge, you just have to be smart.

Decide how much you are willing to spend, and stick to it.

Pretend you are spending cash. How much can you afford out of pocket this month? If you cannot afford it right now, consider that you cannot afford it at all.

Budget non-gift and after-Christmas items too.

Remember to include other things you buy over the holidays--cards, stamps, candles, a tree, decorations, and food galore. Plus, plan ahead to save some money for next year by taking advantage of after-Christmas sales. It is all part of your holiday spending, so plan for it in your holiday budget.

Make a list of everyone you will be buying gifts for, and estimate how much you want to spend on each person.

Include the smaller gifts for teachers or your mailman. Include the price of cards and stamps, because Christmas cards count as gifts when it comes to your budget. Then, add it up and compare the total to your budgeted amount. Make the necessary adjustments. Your brother-in-law may only get socks this year.

Cut down your list.

This may sound harsh, but look closely at who you are buying gifts for. When saving money is an issue, it is ok not to give gifts to everyone you know.

Be creative.

Determine if maybe some people wouldn't be happy with a nice card or maybe some home-baked cookies. Remember, the holidays aren't about presents, but about good will towards man. Good will comes in many forms and does not always need wrapping paper. If you have a skill or a hobby, use it: needlework, knitting, art, poems. Burn a CD, make a photo album, or offer to plant their garden.

Carry your shopping list with you.

Take every opportunity to shop. Start early and try to get things before the rush, before highly sought, hard-to-find items go up in price, and before you can't find what you need. This gives you a chance to comparison shop. It also takes away some of the stress and reduces your risk of overspending just for the sake of getting shopping over with.

If a store offers free gift-wrap, go for it!

It'll save you time and money on buying wrapping paper, tape, bows, and cards and struggling with it all yourself.

Have willpower.

Stick to your estimates and you won't go over budget. eBay is a wonderful shopping tool if you remember to start early enough to account for shipping time. Find the right item, bid your budget price and leave it. If someone outbids you, don't get into a bidding war, just bid on something else within your price range.

Increase your income for the season.

During the holidays there are lots of ways to make a little extra money. Many stores hire part-time workers for the holidays. Since it is a party season, babysitting is in high demand. Be imaginative. You could be the Official Gift Wrapper in your neighborhood and wraps gifts for friends and neighbors for a small fee.

Use your credit cards.

Yes! If you stick to your budget and only spend what you are able to pay for in the next 30 days, then yes, you CAN use credit cards. The key is to use them as you would cash. Using your credit card is not a way to buy things you can't afford, it is a way to organize your spending and possibly get some rewards and discounts along the way.

Make the credit card companies compete for your business.

It may be the holidays, but you can dig in your heels and play hardball. Call your credit card bank and tell them you won't be using their card for your holiday purchases unless they sweeten it up for you. You want a little sugar and spice to make using that card a better deal. You can ask for 0% interest, or double your gas points or flyer miles. Anything to make using your credit card more worthwhile. Banks will usually be willing to strike a deal with you, so long as you try. It can't hurt to ask.

Use specialized credit cards, but carefully.

Many of the stores where you will be buying your holiday gifts offer their own credit cards. They tend to have ridiculously high interest rates. However, they may give you discounts of 10%, 15%, sometimes even 20%! So, you could actually go ahead and use a store credit card to make the purchases and get the discounts, since you are paying these off when the bill comes due the interest rates should not be a problem. If you do get into a pinch and can't pay them off right away, then transfer your balance to your lower-rate credit card before any interest is added to the higher-rate one. You need to be on the ball with this trick, but it saves you money.

It is important to keep in mind that every new credit card you apply for will lower your credit score. So if you're saving up for a mortgage or a large loan, you'll want to avoid applying for additional credit.

Come the start of January, your main concern is going to be getting ready for the new year, and you won't want post-holiday money troubles making things worse. The Ghost of Christmas Past starts visiting even before you put the tree in the trash. Be sure to have a Happy New Year by being money-wise from the start:

When you get your credit card bill, pay it in full right away.

Remember, you considered it just like using cash. Once it is spent, it is spent. You may consider prepaying the credit card company once you know how much you've spent. You don't have to wait for the bill to come in. You know you owe it. So keep the money from burning a hole in your pocket by getting it out to the credit card company as soon as possible.

Hit the sales.

Remember that budget you made for after-Christmas items? Use it now. Wrapping paper, Christmas cards and decorations will be discounted as much as 75%.

Go back to your old budget.

he holidays were about spending and being generous and indulging in delights, but now it is time to go back to your money-saving ways. You just had lots of fun, and got lots of treats, so now return to buying only what is necessary.

Start planning for next year.

Help get over the post-Christmas let down by beginning to plan for the next one. One way to avoid a huge Christmas bill is to buy presents throughout the year. Whenever you see a present that "would be perfect for so-and-so" or a great sale with good gift items, take advantage of the opportunity. The average consumer spent $672 in Christmas expenses for 2003. If you spread that out, and purchase a couple of $20 or $25 gifts every month, the bill doesn't hurt quite as much. Plus, you'll avoid the Christmas rush.

Start a Christmas fund.

Those quarters, nickels and dimes make a great Christmas fund. For your everyday purchases, instead of paying with exact change, pay with bills. You'll be jingling by the end of the day, but you'll easily have a dollar or more in loose change in your pocket. A dollar a day in change is an extra $365 you'll have for Christmas Day.

Last January, when you were struggling with all your holiday debt and trying to get the mulled cider stains out of your carpet, you probably mumbled to yourself, "Next year will be different!" It can be. A few hours spent planning, plotting, creating, and caring can save you lots of money come January, and can make 2008 start off happy and holiday-debt-free.