This may be the most wonderful time of the year. But the holiday season also can be one of the costliest. Last year, consumers spent an average of $786 on holiday gifts. This year, about 60 percent of consumers say they plan to spend about the same amount, while slightly more than a quarter are hoping to spend less. Staying within budget can be a challenge when you are surrounded by the sights, sounds and sales of the holidays. But you can make the 2013 holiday season a little bit jollier by avoiding these holiday spending mistakes.
Mistake #1: Shopping Without a Plan. Gift shopping is very much like grocery shopping in that you need to make a list and bring it with you to the store to stay on track. Before starting to shop, decide how much you are able to spend on each person on your list. Jot down a few gift ideas, too. If you are tempted to purchase an item, check your list. If it is not part of your original plan, leave it be. Still feel the urge to buy an item that is not on your list? Put it in your cart, but do not make the purchase for 30 minutes. Give yourself time to look around and think about it. Also, when figuring out your holiday shopping budget, do not forget to include extras like hostess gifts, wrapping materials and holiday attire.
Mistake #2: Racking Up Credit Charges. The best rule to follow is if you cannot pay for it in cash, you cannot afford it. A multitude of studies show that you spend more money when you pay with credit. If you are not comfortable carrying cash and don't have a debit card, use one credit card and keep a running tally of your purchases. Thanks to some of the available smartphone apps, you can even keep a running tally while you are out shopping, so you know where you stand against the budget at all times. o not be tempted by discounts like 10 percent off on a store credit card purchase. The high interest rate will eat up savings very quickly if you are unable to pay in full when your bill comes due.
Mistake #3: Shopping Only at Retail Stores. There is a whole wide world of selections and discounts available online. You can find great deals on brand-name items from past seasons, store closeouts or refurbished electronics. Many sites offer free shipping and discounts during the holidays. Plus, it is much easier to comparison shop online.
Mistake #4: Waiting Too Long. You are more likely to impulsively purchase the first item you see when you shop for gifts at the last minute. When you are desperate to find a gift, you may convince yourself the cost no longer matters. Another problem that comes with procrastinating during the holidays: You could end up paying hefty shipping fees to get a gift to the receiver on time.
Mistake #5: Busting Your Budget. It can be hard to say no to a loved one who wants a smartphone upgrade or a child who is clamoring for the latest gaming system. But before you go overboard, consider all of the costs involved. That new phone may require a different (and more expensive) monthly contract. Your child will want new video games to play on the new system. Those already-hefty price tags just got bigger. One reason to create a holiday spending budget is to ensure that you do not make choices that will cost you for months to come.
Mistake #6: Trying Too Hard to Impress. Gift giving should not be about outspending a family member or buying over-the-top presents. But it is not just gifts that can lead to trouble. Throwing holiday parties can drain your bank account, too. Be honest with yourself about what you can afford. Instead of going into debt over a meal, ask guests to each bring a dish. Suggest to family and friends that you set a price limit on gift purchases.
It may be a cliché to say that it is the thought that counts. But giving presents to loved ones really should be a joyous occasion. If you only feel stress or regret in shipping for those gifts, then you have lost sight of the meaning of the season. Spend responsibly and make 2013 a year of celebration all around.
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.
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