Financial advice offered for the holidays

TUPELO – Some people have planned all year for the annual holiday season spending extravaganza, socking away money each month in a Christmas Club savings account or budgeting extra cash to knock out the gift list.
Others, however, are approaching the holidays without a big wad of cash for presents. They are now faced with what to do for their next step. Use credit cards? Make homemade cookies? Skip Christmas presents altogether?
Financial experts have advice that can help shoppers with thin wallets, but the reality is that financially strapped shoppers have lost 11 months’ worth of savings.
“If they haven’t prepared for it, there isn’t much they can do about it now,” said Mary Linda Moore, an area extension agent for family resource management at Mississippi State University’s Extension Service.
Almost 28 percent of consumers will put their gifts on credit cards, according to a National Retail Federation survey, but Moore warns against this method.
“It’s just so tempting to get more credit and pay it off later, but later never gets here,” she said.
While more than a quarter of shoppers will use credit cards, the figure is the lowest level of usage since 2002, according to an NRF survey.
The survey also found that 43 percent of holiday shoppers will rely on debit cards as a primary form of payment, a 20 percent increase from 2005’s 34.3 percent. Another 25.7 percent of shoppers will use cash, up from 24.9 percent last year.
This year, NRF forecasts that the average American will spend $518.08 on gifts this year. However, 69 percent of adult holiday shoppers don’t have a budget this year, according to a poll from the National Endowment for Financial Education.
Less stressful shopping
There is no get-rich-quick method that will take the stress out of Christmas-related expenses, Moore said. But there are some things shoppers can do this month, said Susan Hayden, a Dave Ramsey – certified counselor based in Belden.
First, know how much money you have to spend.
If you don’t have a household budget, make one. See how much money is left after the bills are paid. That money is the pool where the Christmas shopping funds come from, she said.
It’s the same one that usually is used to fund “fun” activities, such as dining out, movies and impulse retail purchases.
If you want more money for Christmas shopping, she said, you have to cut back on the other discretionary items.
Once you know how much money you have to spend, you need to set a budget for your Christmas shopping. Do you want to spend all your leftover money or do you want to have some money to go out to eat in December?
“Most Americans know that they will be spending heavily during the holidays, and without a plan, that spending can quickly spiral out of control,” said Paul Golden, spokesman for NEFE.
In the NEFE poll, 11 percent of shoppers admitted to going overboard with holiday shopping.
One way to avoid going overboard is to make a list, Hayden said.
“Make a list and stick to it,” she said. “Know how much you are going to spend on each gift.”
Moore also encourages shoppers to cut their gift list if they are strapped for cash.
Explain your tight financial situation to previous gift recipients, Moore said, and tell them that you’d like to not exchange gifts this year.
“Say you’d like to go out to eat if you already do that but you’re scaling back gift-giving,” she said. “Most people understand that.”
If you have to cut people from your gift list, Moore recommends starting with the adults.
“I have a rule that I give the kids gifts in my family and when they turn 18, that’s it,” she said. “The adults gather and spend time together instead of spending money.”
Emotional spending
Many shoppers fall into the trap of emotional spending, the experts said. This is when you’ve bought a present and then you think it’s not good enough so you buy another gift, Hayden said.
Or, you get panicked because, while shopping at the last minute, you buy something that’s easy but costs more, Moore said.
“You want to do things for other people but sometimes people just appreciate a home-cooked meal,” Moore said.
Reduce your emotional spending by not shopping when you are tired, hungry or distracted by kids, Hayden said.
Moore added, “Don’t shop when you’re tired because you’ll fall for things when you’re tired.”
The trick is to start early so you have time to look for bargains that will stretch your dollars. You also can make gifts, the experts said.
“I think families that have a small budget can be creative,” Hayden said.
And, if you want to generate extra money, look around your house for things you can sell. You also could get a temporary job to generate more spending money for the holidays.
Layaway is another good option. It allows you to buy gifts and pay for them over time without going into debt.
But no matter what you do, the experts agreed, it’s not a good idea in this economy to take on a lot of debt this time of year.
“You just don’t buy Christmas gifts if you don’t have the money,” Hayden said.
Contact Carlie Kollath at (662) 678-1598 or carlie.kollath@djournal.com.

CARLIE KOLLATH / NEMS Daily Journal