Friday, November 16, 2007

Said it Once...I'm Saying It Again...

Money Sense: Avoid Holiday Debt
Make a list and check it twice

October 18, 2007--Each year, too many of us spend the first 11 months of the year boosting our savings, eliminating debt, and improving our credit scores—only to blow it all in an orgy of mindless holiday spending at the end of the year—leaving us in a deeper financial hole each year, and depressed and discouraged about our ability to ever break the cycle and get ahead.

There's no getting around it—holiday overspending is a major poverty trap, one that ensnares millions of Americans each year. And despite a national credit crunch and housing recession, the financially destructive holiday "tradition" looks like it will continue in 2007, according to the Wealth in America Report, CNBC's quarterly survey of Americans about their spending habits and plans. According to their survey of more than 800 people, Americans plan to spend an average of $839 on Christmas gifts—17% more than spending planned for last year's holiday season.

That's why, every October, I recommend strategies designed to keep the BLACK ENTERPRISE and Doug Banks Morning Show families from overspending and undermining their progress toward wealth building goals. If you don’t want to suffer from a holiday debt hangover in 2008, take the following steps now:

* Make a list and check it twice (at least). If you shop with a written list you will spend less money and make fewer impulse purchases. This is true for regular grocery shopping and goes triple for holiday shopping, which is fraught with impulsive and emotional spending. Make a list of everybody you plan to buy a gift for, along with a dollar amount for how much you plan to spend on each person, and add up the total. When you get up off of the floor, you will cut some people off of your gift list (a holiday card will do), budget for fewer and/or less expensive gifts, or all of the above. Either way, you’ll make your spending decisions long before you set foot into a mall and get caught up in the emotional chaos of holiday shopping. Refuse to do any shopping without referring to your list—and do not leave the list at home. Even if you don’t follow it to the letter, you will still spend far less than you would if you hadn’t prepared a written budget for your shopping in advance.

* Lock up the credit cards. Resolve to use only cash to pay for holiday gifts, and you will be forced to stick to a budget and think twice about every purchase. Best of all, even if you overspend and are forced to eat holiday leftovers for breakfast, lunch, and dinner for the month of January, at least you won't face a mountain of high-interest credit card debt.

For more ideas on how to avoid overspending during the holidays, as well as on how to get your finances back on track if you lose control, read Holiday Debt Hangover.

Also read, Avoiding Holiday Debt, which includes downloadable holiday budgeting worksheets.

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Yours in Reason, Bria :)