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Dreaming of a Penny-Pinching ChristmasBy Vicki McClure Davidson
I'm from a pretty large family. Christmas-gift shopping could pummel our budget if our family tried to give all the nieces, nephews, aunts, uncles, and in-laws a gift, so I don't even try. I've been a penny-pinching Christmas shopper for decades. And now, that's chic.
However, I'm close to some family members and a few close friends, and really WANT to give them a small gift during the most wonderful time of the year as a token of my love and affection for them. It is, after all, Christmas.
But, I won't risk our family's financial security or my sanity to do it, and neither should you. Materialism and conspicuous consumption at Christmas has gotten out of hand for decades (heck, even cartoonist Charles M. Schultz decried this way back in 1965 in his TV animation classic, A Charlie Brown Christmas). The recent mercurial behavior of our unpredictable and crisis-ridden economy is another reason to change our approach to the holidays. The financial crisis we're going through now is a cold slap of reality.
Here are some valuable tips on a having a "wonderful penny-pinching Christmas" that have worked well for us and can work for you.
Make a Gift List and a Budget Early
Making a list early on, even in January for the next Christmas, has been such a help to me. After-Christmas specials and an increased amount of never-used gift donations to thrift stores make January one of the best months for shopping for the next Yuletide season. Summer is also a good time.
Armed with a list of each person's likes, dislikes, clothing sizes, and hobbies, you could easily get all of your shopping done months before December rolls around again. (While I've tried but have never accomplished this, my goal is to succeed this year).
Determine a maximum amount to spend on each individual or family and WRITE it down. If you purchase something in the spring, by winter you may be fuzzy-headed about how much you've already spent on someone and may give in to the temptation to buy them "just one more little thing." Don't do it!
This is where overspending innocently begins. Nip it in the bud NOW by setting limits for yourself and then NOT GOING OVER those limits.
One more thing: Take the maximum dollar amount you allocated for each person on the list, and add them all up. You may be horrified to see how much money you could be spending. Take a deep breath, and read the next section.
Prune That Gift List!
Spend a bit of time looking over the list and determining if there are individuals or families that you could strike off the list. So many of us want to spread holiday cheer to everyone who crosses the paths in our lives, but this becomes more and more of a financial and mental burden. This overindulgence at Christmastime can lead to undue stress and depression. How to solve this? Do NOT give presents to everyone. It's that simple.
So, cross some names off that list. For those who are now off your gift list, you can make them a lovely personalized Christmas card and write in there a few specifics as to why you find them to be so special and how much you have benefited from having them in your life. Be sincere and be specific. Believe me, most people will appreciate this token of yourself much more than you spending $30 on a fruit basket or an unneeded shower caddy. We have too much clutter in our lives already.
Start Shopping Earlier
Starting long before Christmas helps absorb the financial impact of Christmas shopping. Set aside a closet, a trunk, an area in the garage, or somewhere else where you can store/hide your gifts. Shopping early has the disadvantage of giving you multiple months to forget where you hid purchases. By selecting one secluded spot for storage, you won't be tearing through the house the week before Christmas, crazily trying to locate gifts that you bought and hid in April. My poor mom has "lost" gifts at Christmas only to find them months later, in a forgotten hiding place.
Don't try to do all your shopping in December. That's when stress and time running out can make you lose control and overspend or use a credit card. A recent Consumer Reports survey found that as of December 9, one-third of respondents had yet to start their holiday shopping, and that just over a third did not expect to finish their shopping until Christmas Eve. This should be the time when you are having fun with your family and coworkers: sipping hot cocoa, attending Christmas programs, building snowmen, reminiscing in front of the fireplace. Shopping with all the frantic crowds is indeed stressful and unnecessary.
A good time to shop for gifts online is during the long months of summer. Since this is the time of year that people are traveling and shopping online less, great bargains can be had. Many online companies, like Amazon.com, offer free shipping several times a year (you must spend a minimum dollar amount to receive the free shipping). In past years, this has been offered during through the Thanksgiving season. With the high cost of gasoline, free shipping and shopping in your PJs in front of the computer is a blessing, so check into it for additional savings.
Stressed Out, Me?
Sadly, the holidays hold more stress than joy for most people. A survey panel conducted in 2007 by the market research company Communispace discovered the following: Panel members were asked to view and select an image that best described their feelings about holiday shopping. Most chose an image of a blank-faced woman, indicating little excitement or pleasure at the thought of buying gifts for the holidays. The second largest group chose images portraying stress and anxiety. Only a few respondents picked images that suggested they were happy or excited about shopping during that holiday season.
By analyzing and limiting the amount of time and money you'll spend on gifts, you'll be freeing yourself. Freeing yourself to embrace the holidays rather than dread them. Pamper yourself during December with a less-rushed agenda, with fewer obligations, and you'll likely have the most stress-free Christmas you've had in years.
For ideas on Christmas family activities that are frugal and fun, click here.
Pay Cash Only!
This is one of the hardest things to do when shopping for Christmas gifts, but it is the one area where you will save the most money. Finance charges and other credit card fees will eat up any sale prices you thought you got. Research also shows that impulse shopping with a credit card is much easier than with cash because "the pain factor" is significantly less with a credit card. When you're handing over a stack of bills to a clerk for an item, you tend to analyze and evaluate the wisdom of the purchase more deeply. As a result, the act of paying cash will drastically reduce those frivolous, on-a-whim purchases, whether you're conscious of it or not. Handing over cash hurts; swiping a plastic card does not. So, pay cash only!
I've not used a credit card at Christmas for more than 18 years now. It was extremely hard to do at first, but I adjusted, and now it isn't difficult at all. However, I must plan ahead. The peace of mind I get in January (versus that of my less-frugal friends) is priceless to me. The amount of interest our nation pays on Christmas credit card purchases is staggering.
Consumers who pay their bill in full and on time every month enjoy what's called a"grace period." According to a recent article by Bob Sullivan on how to save money on credit cars, they never pay interest, and have about 30 days grace before charges kick in. But consumers who fail to pay on time fall from grace. From that point onward, they pay interest on every single purchase they make. That stinks, and it's a very bad way to use credit cards. Buy lunch for $5? The article points out that you are paying interest on that money before you even eat the first French fry.
Credit card terms are always changing, and not ever to help the consumer. Do not let them persuade you to open a new account or increase the limit on your current account. Your interest rate can skyrocket if your credit score declines because of your payment behavior with other creditors, even if you always pay your credit card on time with them and have never missed a payment. Some card issuers will raise your rate if you inquire about a car loan or open a new credit card. At Christmas, the major card companies may entice you with teaser rates, those that are low for a short time, and then explode once the "trial period" is over. Late fees have doubled in the past ten years and numerous new fees and/or penalties have been added. As of fall 2008, credit card issuers were starting to pull back on promotional offers that allowed borrowers to pay no interest for months as they tried to get ahead of stiffer lending rules that have been proposed by federal banking regulators and Congress. Reward programs became stingier as lenders analyzed ways to cut corners to save money. Card companies, for example, started to substitute cheaper brands in their reward programs as a way of lowering the cost of their redemption prizes.
Credit card dependence in the United States is now starting to reverse itself, likely because of the economic crisis America is going through. Many families, once content to "buy now and pay later," are now showing signs that they are eager to trim or eliminate their reliance on credit cards. The US Treasury Department is currently spending billions of dollars in taxpayer money to clean up the economic mess brought on in part by all sorts of easy credit.
In a nutshell, reign in your credit card habits. The tough financial times we face in the upcoming months necessitate it. And, should you need to apply for a credit card at some point, be EXTREMELY cautious. There is a new game in town now. Always read the small print. You may be shocked to see how things have changed in the credit card world in just the past year, even for those consumers with good, solid credit and on-time payment.
Click here to go to a PBS video that illustrates the devastation using credit cards at Christmas can bring. Here's another link for eight important things you should know about credit cards.
No matter how much you fool yourself or justify or lament, using a credit card ALWAYS, ALWAYS, ALWAYS increases the ultimate cost of the purchase.
So, that darling 40-percent-off sweater you bought with plastic for Aunt Margo could ultimately cost you double what you thought you paid for it.
You may be thinking, with a sly smile, "If I pay that sweater off when it first hits my statement, there will be no finance charge." And you would be right. That is, IF you do it. And, about 48 percent of people do not.
If you believe you can uncompromisingly be in that percentage group who paid their Christmas bill off in full in January, then follow your heart. If you only charged the sweater, and nothing else, it is indeed possible. But I won't step down from my stance. Using credit cards is always risky, because despite your most ardent intentions, you can be seduced into charging a few more things and you never know what other financial obligations will pop up after the Christmas tree is taken down. Oh, no, your water heater conks out on January 12th, your car needs a new alternator on January 14th, your son decides he wants to join the chess club at school and there are fees for registering and for away tournaments.
And just like that, whoosh—your frugal, fierce resolve to pay off that $400 credit card statement when you receive the bill simply cannot be done because you've got unexpected expenses that wipe out your available cash. We cannot plan for future demands on our money. But we can take control and NOT add to the mess with capricious spending.
In 2007, although fewer consumers used credit cards during Christmas, those who did depend on that method of payment expected to charge an average of $723 for gifts, an increase of 15 percent from 2006.. Consumers with Internet access at home expected to charge $759 in holiday purchases.
Once again, do not, do not, do not use credit cards at Christmas..
For more information about credit card debt and learn how to get out of debt, there are a number of outstanding websites on the Internet that can be of help. One that we recommend that you check out is a website to help people learn to eliminate credit card debt at www.daveramsey.com. Financial adviser Dave Ramsey offers in-depth financial information on the site and is also the host of the nationally syndicated radio program, "The Dave Ramsey Show," which broadcasts each week to more than 350 radio stations throughout the United States.
If you already have a high amount of credit card debt, one thing you can try to do now is transfer your credit-card balances to a card with a lower interest rate. Opt for a card with a 0, 1, or 2 percent rate if possible, and concentrate on paying it off entirely while those low rates last.
Make the Gift Special
From the gift list you constructed in January, you should know a number of things about each person on the list, such as his or her interests, likes/dislikes, and/or hobbies. Hopefully, this knowledge will keep you from buying what I refer to as "Christmas Gifts from Hades."
Have you ever received a Christmas present that was so inappropriate for you that you thought you opened a gift intended for someone else? You may have received an assortment of gourmet coffees, but suffer from ulcers and can't drink coffee. You may have received a lovely cologne or after shave, but have allergies. My daughter, for several years, received dainty pierced earrings from a relative. They were indeed cute, but my daughter did not have pierced ears.
Pay attention and keep notes. Since you pruned your gift-giving list, you should only be buying gifts for those people whom you know something about. Does the gift recipient enjoy Italian cooking, or candles, or sports, or alternative music, or computers, or Irish history, or old Hollywood paraphernalia? Have your gift reflect that interest. If perchance you don't really know them but want to keep them on the list, call another relative or friend for some personal information. If you find that some of your gifts will be too costly or difficult to find (such as your brother's only interest outside of work is hang gliding), take a different, more creative route.
Make a personal framed photo collage, bake batches of amazing brownies and ornate cookies, create a scrapbook of childhood memories, tape or DVD-R episodes of a favorite TV program, make a special 3-ring cookbook from Internet recipe printouts, personalize a sweatshirt with fabric paints, create whimsical coupons on the computer to be redeemed for free babysitting or cleaning out the fridge... do anything that keeps you within your budget and says, "I care about you and this gift is to show you I care." Gifts do not have to cost much to show that they are from the heart. Some of the most cherished Christmas gifts cost nothing at all.
Most importantly, you will give yourself a debt-free Christmas, one that you won't still be paying for come next Christmas, and possibly the Christmas after that.
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Coffey, Laura T., MSNBC Correspondent, MSNBC website, "Beware of Financial 'Help' Offered in TV Ads," July 17, 2008 (http://www.msnbc.msn.com/id/25705908/).
Consumer Reports Blog, "Ready for Christmas? Not Yet, and Dreading the Debt," December 18, 2007 (http://blogs.consumerreports.org/shopping/2007/12/consumer-report.html).
Dash, Eric, "Consumers Feel the Next Crisis: It’s Credit Cards," The New York Times website, (http://www.nytimes.com/2008/10/29/business/29credit.html?_r=1&th&emc=th&oref=slogin), October 28, 2008.
Sullivan, Bob, MSNBC, "Red Tape Chronicles: How to Save Money on: Credit Card Bills," (http://redtape.msnbc.com/2009/02/maybe-two-years.html), February 3, 2009.