By Andrew Housser
The scent of a crackling fire, the twinkle of decorations that soon will turn to red-and-green, or blue-and-white, lights, good cheer, feasts and family gatherings. With the cool breezes of fall -- and in many places, the start of cold weather -- it is easy to note that the holidays are just around the corner.
For most people, the holidays are a time of fun and festivity. But for many people, they also are a time of overspending and going deep into debt. At this time last year, a Consumer Reports poll found that 13.6 million people were still repaying bills from the previous year's holidays. It's lovely to be generous, but it is dangerous to enjoy the holidays at the expense of your financial well-being.
Now is the time to put a plan in place for holiday spending. With some intention and careful management, you can sail through the season and make it to 2012 with minimal holiday debt hangover. Here are a few suggestions that might help:
1) Lock up credit card debt.
When you reach for your wallet for holiday purchases -- and everyday purchases over the next few months -- be cautious. Switch to cash or a debit card. (Monitor your bank account to be sure you do not go into debit overdraft.) You will avoid debt, and chances are that you will also spend less when you shop.
2) Make a spending plan.
Also known as a "budget," a spending plan is a great tool. Begin by listing income on one side of a page, and both regular and periodic expenses on the other. If your income cannot cover your expenses, evaluate where to cut costs, or how to add income. If you have money left over, use it to pay off debt or save for a rainy-day fund. At this time of year, also list all those for whom you expect to buy gifts, and make a plan to save up to buy those gifts. Plan for the gifts to fit the budget, rather than choosing gifts and going into to debt to purchase them.
3) Avoid eating out.
Dining out can quickly knock out your budget. On average, Americans spend $2,600 per year in restaurants. That is approximately $50 per week, per person. Challenge yourself to eat in, if only for the next two months. Channeling all the savings to a holiday fund could amount to $400 per person in your household by year's end.
4) Try a pre-holiday spending fast.
A "spending fast" means avoiding all non-essential spending. That means no extras at the grocery store, no new or used clothing, no dining out, and no entertainment that costs money. If you are interested in challenging yourself to change your lifestyle or focus on values, a spending fast can help you build a holiday fund -- fast!
5) Shop as you go.
Beat holiday debt by shopping early. The advantage of extra time gives you opportunities to save money, from coupons to cashing in credit card rewards or even coins for gift cards. You can give the gift cards, or spend them to purchase gifts for others. Deep-discount shoppers might watch for the perfect items on clearance, at thrift stores, or on eBay. Others might use the advance-planning time to make some gifts.
It can never be said too often -- the holidays are about caring, not about credit cards. Put your emphasis on good times with family and friends, and not on gifts. As a result, your holidays will be less stressful, and you'll have a happier New Year when you are not struggling to pay off long-forgotten gifts.
Do you want to buy everyone a present? Yes... but you don't want to be shocked when the bills come in. (©Photodisc/Thinkstock)
Andrew Housser is a co-founder and CEO of Bills.com, a free one-stop online portal where consumers can educate themselves about personal finance issues and compare financial products and services. He also is co-CEO of Freedom Financial Network, LLC providing comprehensive consumer credit advocacy and debt relief services. Housser holds a Master of Business Administration degree from Stanford University and Bachelor of Arts degree from Dartmouth College.
