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christmas spending quickly adds up

By Brett Arends
Sunday, November 28, 2004
 

Do you know how much Christmas is going to cost you this year?

Chances are it will be more than you think - no matter how closely you stick to your shopping list.

The typical American adult is going to spend just under $800 each on Christmas, according to a survey by the National Retail Federation.

``That's everything - gifts, decorations, greeting cards, candy, food, flowers, and what people spend on themselves,'' said a spokesman.

But the true cost of Christmas doesn't end there.

Most Americans won't pay cash, they'll charge it. And if you don't pay off the balance quickly, you're paying more. A lot more.

Credit cards are the most expensive way to borrow. They often charge 15 percent annual interest or more.

Do the math. If you spend $800 and leave it on your card for a year, at 15 percent interest you've really spent $920.

Even if you pay it off in $100 installments, it will take you through September and raise the total cost to $845.

The hidden costs don't even end there. By spending that money, you're missing out on the chance of saving it for your retirement.

Don't laugh. Most Americans are desperately undersaved for their golden years.

Lloyd Glazer, a portfolio manager with Advest, Inc., says long-term investment returns average about 3 percent a year after inflation.

So if you save that $845 for thirty years you should end up with $2,100 before tax - in today's money.

Now that you know how much Christmas is really going to cost, you might want to consider some easy tips to bring the bill down.

Set yourself a budget. Most financial experts agree how important this is. The trouble is, the type of person who needs to make a budget is the type of person who won't stick to it.

So when you go shopping, leave your credit and debit cards at home. Take cash. If you're planning to spend $300, take $300. It forces you to make hard choices and stick to your budget. A study by Consolidated Credit Counseling Services, Inc., of Ft. Lauderdale, Fla., estimates people spend up to one third more when they pay with cards instead of cash.

Don't waste money. Do you think that Singing Santa paperweight will still be funny by Monday, Jan. 3? Try buying less and wasting less.

Buy online. It's often cheaper, as well as easier. The NRF also notes many e-tailers are offering free shipping. Online shopping also keeps you away from the impulse gimmick gifts in the stores.

If you buy online, use discountWeb sites to get money back. Check out butterflymall.com, ebates.com, fatwallet.com and mrrebates.com.

If you must use a credit or debit card, make sure you're getting the best deal. Card companies are falling over themselves to offer you great short-term benefits so they can rip you off down the road. Take the benefits, pay off the bill entirely in January and then cancel the card. Go to Bankrate.com for the latest offers.