Develop a plan to prevent overspending this holiday season

The holiday season is almost here. While spending time with friends and family often makes many people excited about the start of holiday festivities, the cost of purchasing gifts, food, decorations and other items can be high. Consumers who do not develop a money management plan may find themselves turning to credit cards or their savings account to fund activities. This can lead to a debt hangover or setbacks at the start of the new year.

Consumers are already planning to spend more during the holidays than in previous years, according to the 2012 Retail Report released by FTI Consulting. Americans are expected to shell out 4.5 percent more, with the majority of purchases being made online.

"Overall, consumer spending trends have been fairly impressive considering the financial anxieties still felt by many Americans,” said Bob Duffy, global co-leader of the FTI Consulting Corporate finance and restructuring practice.” Despite slowing momentum in recent months and lingering concerns over income growth and employment prospects, sales growth trends have managed to stay within the range of historical averages.

In addition, fewer retailers are expected to provide the same level of drastic discounts as they did last year. This combination of increased spending and fewer sales has the potential to put more families into debt, making it crucial to construct a budget.

Managing spending responsibly

There are several ways consumers can keep holiday costs low this year. First, shoppers should abide by a gift list, which outlines what they plan to purchase for friends and family. Creating a list can help stressed-out shoppers avoid impulse buys at the last minute. In addition, it enables them to compare costs with different retailers to find the most affordable items.

It can also be helpful for consumers to create spending caps for each individual person for which they plan to buy, so that they know exactly how much money they will shell out. Having a firm limit can help shoppers avoid unnecessary purchases and prevent them from breaking their budget.

Finally, cash-strapped individuals can get creative with gifts to save money. For example, hosting a gift swap party for adults can ensure that everyone receives an item without forcing each person to buy something for every individual at the event. Homemade gifts, such as baskets filled with breads, cookies and preserves can also be a cost-effective and sentimental alternative to purchasing a store-bought item.