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Tame the holiday cash crunch

November 03, 2006|by LYNN F. LITTLE

Charging holiday gifts can speed mail or Internet orders and simplify a return, but using credit might give you a false sense of your ability to pay. While shopping is very much a part of the holiday season, it truly is the thought that counts.

Spending more than you can afford can compromise your ability to meet future needs. Overspending is easy.

Advertising increases during the holiday season, and stores offer expanded inventories.

It is, however, possible to shop, follow your spending plan and enjoy it without feeling like Scrooge.

Taming the holiday cash crunch doesn't require Scrooge-like behaviors. Spending responsibly actually can improve the holiday mood because there's no reason to worry about holiday bills after the first of the year.

Ask yourself, "Has my/our life changed in the last year?" Has an illness, job loss, death or divorce reduced resources? Have children graduated from modestly priced toys to a wish list with expensive clothing or electronics? Have adult children married or moved away? Are children or grandchildren facing educational expenses? Do aging parents have special needs?

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Approaching the holiday season as usual during difficult times might do family members a disservice. Children can hang on to unrealistic expectations and miss lessons that can be learned from weathering life's inevitable ups and downs as a family.

Including older children in discussions about holiday expectations and finances can be helpful and educational.

Talk with family and friends to identify the most meaningful holiday traditions. Skip less important activities to save time, money and reduce stress.

Consider seasonal expenses, rather than costs associated with one or two days. Holiday expenses aren't limited to gifts.

The cost of decorations, wrapping paper, ribbon and tape, greeting cards, postage, extra food, long-distance phone calls, party ware, seasonal clothing and travel all can stress personal finances.

Make a list of everyone you would like to remember with a gift. Leave room to jot down a few suggestions and a spending limit.

Compare estimated spending costs with funds available after meeting monthly expenses, such as a mortgage payment, utility bills, car expense, etc.

Coming up short is not unusual, so it is important to adjust holiday spending rather than go into debt.

Larger families might choose to draw a name. Limiting the cost or number of gifts also can relieve some of the pressure.

Pooling funds to buy one gift the whole family can enjoy is an option. So is giving of yourself. Consider homemade coupons for services such baby-sitting so young parents can have a night out, yard work for older folks no longer up to the task, small household repairs, mending, dog-sitting, shopping or running errands.

Gifts of time often nurture relationships in a way that purchased gifts might not.

Shop with a list when stores will be least crowded (early or late in the day and/or during the week).

Reserving a vacation day to shop mid-week works for some people. Trading child-care responsibilities can free up time for young families.

Check newspaper inserts and advertised prices to take advantage of price reductions, but remember that a store might advertise one or two items at a reduced price (loss leaders) to attract shoppers and that not all prices in a store will be reduced. Weigh the time and expense of traveling from store to store, versus the potential savings. Shopping early in the season will afford the best selection; shopping later in the season might result in savings as prices are reduced.

Shopping locally and at less crowded specialty stores can also save time and money. Choose reliable retailers who stand behind what they sell and check return (or exchange) policies before buying. Ask for a gift receipt in addition to the sales receipt and carry an envelope with you to organize receipts as you shop. Enclose the gift receipt with the gift card.

Shopping via catalogs or the Internet can allow you to shop in the convenience of your own home any time of the day. Weigh convenience, delivery costs and time, for example, the closer the holiday, the more expensive delivery might be.

Decide how you will pay before you go shopping. While carrying a more-than-normal-amount of cash can be risky, when it's gone, it's gone. Paying by check can help you keep track of expenses, but remember to deduct each check promptly. A debit card withdraws from a checking account without a check, but amounts also must be deducted from your account. Using a credit card to pay for purchases can mean that bills come long after the holiday is over. If using credit, try not to charge more than you can reasonably pay in one to two months.

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