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Have yourself a cost-conscious Christmas


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POSTED: Tuesday, November 25, 2008

Every year we hear the horror stories. People with good intentions spend much more than they should on Christmas presents and all the related seasonal expenses, then find themselves deep in debt when the bills come due in early in the new year. Some victims of seasonal overspending find themselves on a slippery slope of personal debt that can end in disaster.

The good news is that it doesn't have to be that way. Planning and good money management can get you sensibly through the season.

Ed Pei, First Hawaiian Bank's executive vice president of consumer loans, and Wendy Burkholder, executive director of the nonprofit Consumer Credit Counseling Service of Hawaii, are trained professionals when it comes to the ins and outs of consumer spending. Taking their suggestions and adding ideas from several Web sites, here are five things you can do to keep Christmas spending in line:

 

MAKE A BUDGET: INCLUDE EVERYTHING

Budgeting for Christmas begins with knowing how much money comes in each month and where you spend it. This includes not only your rent or mortgage, utilities and car insurance, but also that daily latte or pau hana drink, the cable bill and those endless solicitations to “;please kokua”; and contribute to fundraisers. If you carry balances on your charge cards, be sure to count the interest and fees.

“;Budgeting is probably the most crucial part for the consumer family,”; says Burkholder, adding that most people “;compartmentalize”; their spending and don't realize what the total adds up to.

Now you can make an educated decision as to how much money you can spend on gifts and other holiday expenses.

Be cautious. It can be tempting to plan on using next spring's tax refund to pay off this year's Christmas debt, but if your car radiator blows up or the refrigerator dies in the interim, you might not be able to do so.

 

SET YOUR PRIORITIES: WHAT REALLY MATTERS?

Decide what is most important. Your pets and your niece's newborn are not going to feel slighted if you don't buy them anything. Adults and mature teens could agree to forgo gifts - either to save money all around or so that more can be spent on children and 'tweens.

Instead of expensive individual gifts, families could opt for one big-ticket item, such as a new television. Large extended families could opt to draw names in a “;secret Santa”; exchange with a set price limit, rather than invest in a lot of smaller gifts for everyone.

Free up money for gifts by cutting back on cards. Send a holiday postcard instead, or an e-mail, or make a phone call (depending on your long-distance service).

Also, prioritize the relative importance of gifts versus the cost of hosting parties, buying more figures for the lawn display or having a Christmas tree.

Prioritizing also involves enforcing realistic limits after the “;need-to-have”; living expenses have been covered. The kids may have to make do with five gifts this year instead of 10.

 

DON'T FORGET: YOU'RE THE BOSS

Store displays and sales are tempting, credit cards make it easy to “;buy now, pay later,”; your kids can make convincing arguments for why they need this or that, and Hawaii residents are raised to be generous, but each of us ultimately is responsible for our spending.

“;It comes back to the consumer,”; Burkholder says. “;It's about discipline and awareness. You're given rope, (but) the question is, Are you going to hang yourself with it?”;

Avoid the “;noose”; by spending wisely and choosing each gift with care. How many of the gifts you received last year do you still remember? Will the item you're buying be treasured by the recipient, or will it be set aside and quickly forgotten? Some children take care of their toys; others trash them. Gift accordingly.

It's easy while spending your hard-earned money on gifts for others to also buy a few “;gifts”; for yourself. Don't do it. That's not what you're there for!

 

TRACK YOUR SPENDING:AND DO IT DAILY

Stay on top of things by logging your expenditures every day if possible. Don't forget to include those nickel-and-dime expenses for which you don't get receipts.

First Hawaiian Bank's Pei points out that credit and debit card issuers will help consumers resolve problems with merchants - a good reason to use credit cards if you can do so wisely. Credit card receipts are also easy to keep track of.

The key is being aware of how much you've spent. If you've spent 80 percent of your Christmas budget and Christmas is still two weeks away, you'll know that you need to adjust your spending accordingly.

 

PLAN AHEAD: THINK ABOUT 2009

Ask your bank, S&L or credit union if they offer a “;Christmas Club”; savings program that will automatically deduct a set amount from each paycheck. It's an easy and painless way to save money that you would probably otherwise spend.

Consider nonseasonal “;Christmas”; gifts. If you see something in June that someone on your list would like, give it to them then. They'll be able to enjoy it that much sooner, and that's one less person you'll have to shop for when time is short, money is tight and the malls are gridlocked.

The best time to buy Christmas cards, wrapping paper and decorations is the day after Christmas. Buy then, but only if you have the storage space and can afford to have that money tied up until next season.


ONLINE ASSISTANCE

» A budget worksheet is included in the Consumer Credit Counseling Service of Hawaii's application and can be downloaded without obligation at www.cccsofhawaii.org.

» More ideas: childcare.about.com, frugalliving.about.com, daveramsey.com,

greendoc.net, hubpages.com/search/christmas+budget, moneysmartlife.com.