You don’t have to empty your wallet to have a fantastic Christmas. The best way to save money during the holidays is to prepare a Christmas budget.
Holiday spending has landed many people in financial stress and debt. But by setting a budget and sticking to it, people don’t have to worry about a credit card hangover and not having enough money in their own pockets after a holiday splurge.
According to the Consumer Reports 2011 Holiday Shopping Poll, overall gift spending is expected to be slightly less than last year, with one in three consumers saying they are cutting back on purchases. More consumers (52% vs. 47% in 2010) also say they will live within their budget this year. But if history offers any indication, the “sticking to it” part of budgeting is actually the sticky part of budgeting. Forty-five percent of those who made a budget last year exceeded it, the poll says, with 5% going way over their budgets.
Although shoppers will tighten their budgets a little more this holiday season, the number of Americans who will make purchases in more discretionary gift categories is rising, the National Retail Federation (NRF) reports in its 2011 Holiday Consumer Intentions and Actions survey. According to the survey, people plan to purchase more home décor or home-related furnishings (18.3% vs. 16.5% in 2010), jewelry (21.2% vs. 20.3% last year), sporting goods or leisure items (17.8% vs. 15.5%), and personal care or beauty items (24.0% vs. 22.4%).
“Though we do expect consumers to be a bit more frugal while buying gifts this holiday season, we also believe that many holiday shoppers are planning on taking advantage of retailers’ holiday sales and promotions to buy themselves something they may have had their eye on all year long,” says Kathy Grannis, spokesperson for the NRF.
So, how can consumers create a Christmas budget and stay on track with it? The first step is to decide who you want and need to buy gifts for, sources say. Create a list of who you are buying gifts for and then take the next step of deciding how much you can afford to spend on each person.
Force yourself to take the time and plan your shopping trip before you leave the house and promise yourself you’ll keep to your agenda and not be trapped into making unplanned purchases.
Next, consumers should reflect on the previous year’s holiday spending to help plan the current year’s budget.
“Most of us know when we ‘overdid it” in the past,” says James W. Kroeger, an assistant professor in South University’s College of Business. “Most of us have had ‘buyer’s remorse’ about purchases we made because we wanted to please a loved one.”
After creating a budget, shoppers should plan a shopping agenda. By keeping an eye out for in-store and online sales, they can plan out their shopping time. They should also consider shopping during times when it’s likely to be less stressful for them.
“Force yourself to take the time and plan your shopping trip before you leave the house and promise yourself you’ll keep to your agenda and not be trapped into making unplanned purchases,” Kroeger says.
Consumers should also remember that gift-giving is not an obligation, therefore avoid taking on debt that will take months and months to pay off. Christmas debt can take away funds needed for essential items or in case there is an emergency.
“If you’re forced to use credit to pay for some Christmas items, limit the amount to what can be paid off in the first three months of the year,” Kroeger says. “Using credit means paying a lot more for those ‘sale’ items. The bottom line is to keep the spending amount to what you can afford without overextending yourself or impacting budgets for other things.”
A way to avoid debt is to use cash. On the day you plan to spend it, withdraw the exact amount of cash you planned to spend according to your budget.
Whether using cash or credit, consumers should also inquire about discounts and not be afraid to negotiate the price of an item.
“There will obviously be many sales during the Christmas season,” Kroeger says. “If you’ve done your job of planning, you will know what is a real sale and what is not.
“Don’t hesitate to haggle and negotiate,” he adds. “If one merchant refuses to negotiate, another will. No merchant likes to lose a sale.”
Christmas budgeting also offers a way for people to get creative with gifts. Do-it-yourself items and charitable donations can be personalized gifts that don’t cost much, but mean a lot.
“One example was gifting a brick to the 9/11 World Trade Center Memorial in honor of a family,” says Barbara Allison, program director of Business Administration at South University — Montgomery. “This is a way to include everyone in a family without busting your holiday budget.”
There are many ways to make the holiday season special without going broke. Creating a budget can help people avoid financial headaches and focus on the importance of being with loved ones during the holidays.
Author: Darice Britt