Before the holidays arrive, do some careful plotting and planning for family and business expenses. A few hours spent in preparation can mean less money spent on gifts. You don't have to be Scrooge, you just have to be smart.
1. Decide how much you are willing to spend, and stick to it. Pretend you are spending cash. How much can you afford out of pocket this month? If you cannot afford it right now, consider that you cannot afford it at all.
2. Budget non-gift and after-Christmas items too. Remember to include other things you buy over the holidays: cards, stamps, candles, a tree, decorations, and food galore. Plus, plan ahead to save some money for next year by taking advantage of after-Christmas sales. It is all part of your holiday spending, so plan for it in your holiday budget.
3. Make a list of everyone you will be buying gifts for, and estimate how much you want to spend on each person. Include the smaller gifts for teachers or your mailman. Include the price of cards and stamps, because Christmas cards count as gifts when it comes to your budget. Then, add it up and compare the total to your budgeted amount. Make the necessary adjustments. Your brother-in-law may only get socks this year.
4. Cut down your list. This may sound harsh, but look closely at who you are buying gifts for. When saving money is an issue, it is okay not to give gifts to everyone you know. Send only cards to distant relatives, neighbors you don't know well, and business owners who haven't bought from you this year.
5. Be creative. Determine if some people would be happy to receive some home-baked cookies. Remember, the holidays aren't about presents, but about good will towards man. Good will comes in many forms and does not always need wrapping paper. If you have a skill or a hobby, use it: needlework, knitting, art, poetry, etc. Make a photo album, or offer to plant their garden. Use discount coupons for your customers.
6. Carry your shopping list with you. Take every opportunity to shop. Start early and try to get things before the rush, before highly sought, hard-to-find items go up in price, and before you can't find what you need. This gives you a chance to comparison shop. It also takes away some of the stress and reduces your risk of overspending just for the sake of finishing your shopping.
7. If a store offers free gift-wrap, go for it! It'll save you time and money on buying wrapping paper, tape, bows, and cards and struggling with it all yourself.
8. Exercise willpower. Stick to your estimates and you won't go over budget. Budgets are blown on those items that are "perfect" besides being $10 too much. Ebay is a wonderful shopping tool if you remember to start early enough to account for shipping time. Find the right item, bid your budget price, and leave it. If someone outbids you, don't get into a bidding war, just bid on something else within your price range.
9. Increase your income for the season. During the holidays there are lots of ways to make a little extra money. Many stores hire part-time workers for the holidays. Since it is a party season, babysitting is in high demand. Be imaginative. You could be the Official Gift Wrapper in your neighborhood and wraps gifts for friends and neighbors for a small fee.
10. Use your credit cards. Yes! If you stick to your budget and only spend what you are able to pay for in the next thirty days, then yes, you can use credit cards. The key is to use them as you would cash. Using your credit card is not a way to buy things you can't afford, it is a way to organize your spending and possibly get some rewards and discounts along the way.
11. Use specialized credit cards, but carefully. Many of the stores where you will be buying your holiday gifts offer their own credit cards, but they tend to have ridiculously high interest rates. However, they may give you discounts of 10 percent, 15 percent, sometimes even 20 percent! So, you could actually go ahead and use a store credit card to make the purchases and get the discounts, since you are paying these off when the bill comes (so the interest rates should not be a problem). If you do get into a pinch and can't pay them off right away, then transfer your balance to your lower-rate credit card before any interest is added to the higher-rate one. You need to be on the ball with this trick, but it can save you money.
It is important to keep in mind, however, that every new credit card you apply for will lower your credit score. So if you're saving up for a mortgage or a large loan, you'll want to avoid applying for additional credit.
Come the start of January, your main concern is going to be getting ready for the new year, and you won't want post-holiday money troubles making things worse. The Ghost of Christmas Past starts visiting even before you put the tree in the trash. Be sure to have a Happy New Year by being money-wise in advance.
Michael G. Peterson co-founded American Credit Foundation, a non-profit credit counseling organization. Visit debtguru.com for more information and financial resources.