News Column

Planning Can Keep Xmas Spending in Check

Nov. 30, 2012

Larry Avila

christmas gifts

When shopping for holiday gifts for family and friends experts say it's easy to go overboard on spending.

The National Retail Federation forecasts 2012 holiday spending will hit $586 billion, a 4.1 percent increase from last year. The projection reflects growing consumer confidence in the economy, which fed a 4.9 percent rise in average credit card debt per borrower in the U.S. between July and September, when compared to the same time a year ago, credit reporting agency TransUnion said.

However, TransUnion also reported the rate of credit card payments at least 90 days overdue hit 0.75 percent, up from 0.71 percent a year ago.

Kristina Flores, marketing director with Prospera Credit Union in Appleton; Alan Prahl, a financial education expert with the Financial Information and Service Center in Menasha; and Janna Herron, a credit card analyst with offer these suggestions to keep holiday spending in check.

Flores: Don't use credit cards if at all possible. My number one suggestion would be to set a budget in January and start setting aside some money every month so you have a holiday shopping fund ready to use by December. I personally set aside $50 a pay check, so I have all the money I will need saved for Christmas gifts and won't have to worry about it.

When the amount is small, it's something you won't miss. If you have to use a credit card for shopping, use the one with the lowest rate. It all comes down to planning. Don't go shopping without setting limits. One of the biggest reasons people get into trouble with credit cards is because of poor planning.

Prahl: Many people who overspend for the holidays have good intentions about paying off their debt promptly, but something happens to their income or expenses and they start to dig themselves into a financial hole. Gradually, more and more of their income is committed to servicing their debt, leaving insufficient income for normal needs.

Before shopping for holiday gifts, set an overall spending limit for each person. Limit your credit card spending to what you can comfortably pay off in one month.

Herron: The key is to pay off your holiday shopping in its entirety when the bill comes due in January. That means you should have enough cash saved up for holiday gifts to cover whatever you charge. If you can't pay off the entire balance, make a committed effort to do it by February and don't add any more charges to the card until you get the balance down to zero.

If you find yourself in a situation of having too much of a balance to pay off at once, look into cards that offer zero percent interest on balance transfers for a limited time.

Source: (c)2012 The Post-Crescent (Appleton, Wis.) Distributed by MCT Information Services

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