Holidays
Be of good cheer, but watch your wallet
Tribune Staff and Wire Services
November 24, 2004
"I know what the kids want," she said, which is one reason she doesn't impulse buy.
Park, who started shopping
in August, said she will spend more on gifts this year than last, but said she can
do it because she planned ahead. With another month before Christmas, she only has
to get one more gift.
Like Park, many consumers are expected to spend more on gifts for family, friends
and co-workers. But financial planners advise consumers to take a close look at
their resources before racking up purchases.
Many consumers' financial goals tend to fall by the wayside during the holidays.
Before shopping, consumers should create a budget and calculate how much they can
afford to spend, experts say. The budget should include spending limits on specific
items - such as gifts for individual people, decorations, party clothes and food.
Ideally, consumers should set aside money during the year based on how much they
spent the year before.
And consumers should have a dollar amount in mind for particular gifts before walking
into a store. Vague budgets and gift
ideas lead to overspending.
''I tell people not to compare their family to others,'' says Beth Snyder, budget
counselor for the Manitowoc, Wis., office of Catholic Charities. ''Remember the
true meaning of Christmas. Give gifts that cost little but have meaning.''
According to America's Research Group, a consumer behavior research firm in Charleston,
S.C., 38 percent of consumers spend more than they planned during the holidays.
One reason: They wait till the last minute to shop.
''Starting to shop early gives you a lot more time to find better bargains and be
a better shopper overall,'' says Jim Tehan, a spokesman for Myvesta.org, a Rockville,
Md.-based company that offers financial-planning services.
Consumers will spend an average of $702 on the holidays this year, up 4.5 percent
from last year and the highest since 2001, according to a National Retail Federation survey.
Total holiday spending is estimated to reach $220 billion.
''They are not at the point where they are ready to let loose like drunken sailors,''
says Phil Rist, vice president of strategy for BIGresearch, which conducted the
survey of more than 7,000 consumers for the retail group.
''But they are feeling better about the economy.''
Many will use credit cards, but financial planners recommend using cash - particularly
if consumers already are in debt. Between 60 percent and 65 percent of consumers
have an existing balance on their credit card, according to Consolidated Credit
Counseling Services in Fort Lauderdale, Fla.
In 2003, consumers had an average of $2,294 in credit card debt spread out on two
cards, according to Myvesta.org.
People who can't afford a credit card's minimum payment, who are using a cash advance
from another card to pay the minimum, or who are postponing basic needs such as
a doctor's appointment because they're tight on cash, should think twice before
buying any gifts, says Howard S. Dvorkin, founder of Consolidated Credit Counseling
Services.
