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Updated on Friday, November 7, 2014
The holiday season is rapidly approaching, and with it comes the temptation to overspend, over-indulge and regret it later. In fact, according to a recent study, 57% of American parents are willing to go into debt to make their children happy for the holidays. We all seem to have the same annual ritual: indulge in December, and repent in January, promising to spend and eat less next year.
We want to make our children, family and friends happy. Unfortunately, savvy marketers are very good at exploiting that desire. Here are six tips to keep holiday spending low, avoid temptation, and save money in the process. You can still have an amazing time with your family, and you will be grateful in January.
1. Set a budget for presents in advance
Walking into a store without a number in mind just invites disaster. But how do you decide the appropriate number? At the end of the day, money is time. How many hours of your life are you willing to work to pay for the gifts and food that you want to purchase? That is a personal decision, but it is one you should make consciously by doing the math.
To put things in perspective, I do a really simple equation. I divide my net after tax paycheck by the number of hours that I work. That is my net hourly salary. Now, think about how many hours you want to spend working to pay for the holidays. That should give you a good sense of your total budget.
When I think back upon the holidays I spent with my family growing up, I have forgotten 99 percent of the gifts that I received. But I remember the family dinners and the time we spent together. If my parents would have cut my gift allotment in half, I would have been just as happy – and I would still have fond memories today. Time is much more valuable than money. But by spending money you don’t have, you are giving up your time in the form of more hours at work to recoup the losses.
2. Beware of credit cards offered at the checkout counter
Have you been offered 10% off your bill if you open a credit card at the checkout counter? These offers can be a great way to save money. However, they can also be big, expensive traps.
The 10% discount is great if you can pay the balance in full when you receive the first statement. However, if you end up paying the balance over time (revolving), than you will likely end up paying far more interest than you received as a discount. Most store credit cards charge interest rates above 20%. That means if you pay only the minimum due, it could take 10 to 20 years to pay off the balance, and you would end up paying more than twice the purchase price, when you include the interest payments.
3. Shop early, and compare
I still know far too many people who wake up, get in the car and drive to the mall (without a budget, or a sense of how much something should cost). In fact, I used to do that with my father every year. It became a tradition. It was fun, but it was expensive.
Plan in advance, and make sure you compare prices across multiple sites. Amazon.com is always a great place to start, but also think about sites like ebay.com (it is not just for auctions), Google Shopping (google.com/shopping) and Pricegrabber.com.
But you should also look at the two big-box retailers: Target and WalMart. Especially this holiday season, they will be very aggressive in their discounting. In fact, a recent Wells Fargo study showed that Target and Wal-Mart consistently beat Amazon in low prices over the last year.
In order to do this, you need to spend some time, and you need to plan in advance so that you can get deliveries and compare prices.
4. Think about giving gifts after the 26th
For many families who celebrate Christmas, Santa Claus has to deliver presents for the 25th. However, for adults, that really doesn’t need to be the case. Years ago I agreed with my wife and my mother that we would exchange something personal on Christmas Day (which would include a card and a low-cost item). We would then exchange more gifts a few days later, enabling us to buy items that are sometimes up to 70% off, just by waiting one day.
You will surprise yourself. As much as you like the material gifts, you will probably find the personal gifts even more exciting and memorable.
And just remember your hourly salary. If waiting two days to give gifts to the adults in your life cuts the number of hours you have to work by 80%, than it is probably worth it.
5. If you are traveling, you should start the research now
Holiday travel can be very expensive, and you should start researching your fares now, if you haven’t already done so. The best place to compare prices is www.kayak.com, where you can even see the likelihood of the fare increasing. Kayak will give advice, which includes advising you to wait or to make your purchase. The site also offers the opportunity to receive alerts, informing you of the far changes.
6. If you do get into trouble, don’t ignore it
If you do end up spending more money than you planned, don’t ignore the credit card bills or hope that the debt will magically disappear. Make sure that you look around for the way to refinance the debt at the lowest possible interest rate. We keep the best offers on our balance transfer and personal loan tables.
The holidays can be a wonderful time. And memories are always more important than things. To make sure you don’t spend all of your time in 2015 working hard to pay back the debt from this holiday season, just make sure that you set your budget, do comparison shopping in advance and say no to the offers that try to get you to spend more money. You will be glad you did once January comes around.