Financial Education
Tips for smart holiday spending
Going shopping for the holidays is as much a part of American culture as baseball and apple pie. And while spending has been slower the past few years, many experts see a change in that pattern this year, with consumer confidence slowly on the rise.
No matter the economic conditions, the key to a successful holiday season isn’t how much you spend or how many presents you buy—it's about spending smart. Specifically, about how you can get the things you want this year without getting a pile of credit card and other bills to start the next one.
The following smart spending tips can help your dollars go farther and make your holiday season truly bright.
Budget smart Instead of just making a list of what everyone wants and trying to figure out how to afford it all, figure out how much you can afford and then make a list of what to get everyone. Doing so can help prevent you from overspending, while still ensuring those on your holiday list get something they want.
A budget isn't much good if you don't follow it, so a site such as www.HolidaySpendingPlanner.com can help you compare your budget to your actual spending. The site is free, requires no registration, and offers a variety of ways to help you save money, including award-winning financial education and a holiday spending calculator.
The heart of the site is the ability to create a budget, wish lists for family and friends, and then track your actual spending as the shopping season progresses. The idea is that by keeping tabs on your actual spending, and then comparing it to what you had budgeted, you are less likely to get carried away. After all, if you just use a credit card, you might lose track of how much you've spent until you get the bill a month later. But by using www.HolidaySpendingPlanner.com, you can monitor and track your spending throughout the process.
Spend smart There are many ways to save on holiday spending:
- Use credit wisely—Utilizing some form of credit or borrowing is often unavoidable during the holidays. But while simply reaching for a credit card is convenient, it is not always the best option due to the "minimum payment trap."
For example, if you pay just the minimum on your cards each month, $2,000 at 15 percent interest will take more than eight years to pay off, and $4,000 at the same rate will take more than 10 years! Worse still, the amount of interest you pay will be nearly half the amount you charged, with that $4,000 costing you more than $1,700 in total interest.
An installment loan from a bank, credit union, reputable finance company, or retailer, is usually a better option because you know what your monthly payments will be, and when it will be paid in full. The disadvantage is that it’s not quite as convenient and fast as a credit card, so you'll have to plan and get the loan ahead of the holiday rush.
If you are intent on using a credit card, use the one with the lowest interest rate and longest grace period (the time between your purchase and when they begin charging interest), and try to pay off the balance in full as soon as possible to reduce your interest payments.
- Use cash—To minimize all debt and future interest payments, pay cash for as many gifts as you can. This can be done through smart budgeting and tracking your spending, but also by saving up (or even buying presents) for the holidays throughout the year. Just keep a list with you of things you know people will want so you can take advantage of sales and special offers as you find them. The goal is to reduce both the financial impact by spreading it out over several months, and impulse purchases made at the last minute.
- Look for bargains—Using a thrift store can save you a ton of money. And if ran by a non-profit, such as Goodwill, it can also help to fund an organization that provides needed services in your community. While the items available can vary depending on the donations they receive, thrift stores are almost always worth a visit. You also can check out dollar stores, and other discount retailers to save money on smaller items.
No matter where you shop, always ask if they offer a military discount. Almost every retailer will have some sort of discount or special offer for those who serve our nation, and it can save you anywhere from 10 to even 40 percent or more. Just make sure to carry your military ID when you go shopping.
Also remember to take advantage of any discount card or membership you may have. Programs like those offered by AAA and Military Advantage provide discounts at numerous retailers; just check their website to get a list of participating stores and shops, and then present the card at checkout to get the savings.
Save smart There are several ways to spend almost no money on a present while still giving your loved ones something truly memorable.
- Make something—Having kids make something from the whole family is a time-honored tradition that's almost always welcome. The gift of food is also a great option, especially around the holidays when many celebrations revolve around the dinner table.
- Group gifts—If someone on your list wants something out of your price range, consider pooling money from several other people. This increases purchasing power and everyone gets to contribute to a gift that you wouldn't be able to afford on your own.
- Do something special—You don't always have to give a tangible item as a present. Offering to spend an afternoon at the movies with a sibling, a trip to the park with the kids, a night of babysitting for new parents, or helping around the house of an elderly family member can create memories no trinket can match.
- Donate to charity—There is at least one person on every gift list who has pretty much everything, making it difficult to know what to buy. In those cases a donation to a charity close to that person's interests, and in his or her name, is a great way to celebrate the meaning of the season.
About the author Karen Von Der Bruegge is the Chief Marketing Officer for Pioneer Services, the Military Banking Division of MidCountry Bank, a company that provides financial services and education exclusively to the military community. She oversees an award-winning financial education program, and serves on the board of USA Cares, a non-profit that assists military families.
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