Debt quickly can kill joy of holiday giving

Posted: Wednesday, December 31, 2003

AUGUSTA, Ga. 'Tis the week after Christmas and all through the house, open presents are scattered, no room for a mouse.

The children proclaim they love their new toys, but their joyous exclamations are drowned out by a scary noise.

Credit companies laugh with evil delight, as the bills for your credit cards enter the mail and take flight.

Speeding to you with charges you've accrued, figuring out how to pay for it has got you unglued.

What are you to do? What can be done? Paying off Christmas gifts sure isn't fun ...

With the average person spending more than $730 on Christmas this year to buy presents, wrapping paper, gift tags, shipping and more, according to a Gallup poll, many are spending more than they can afford. That overspending can turn Christmas cheer into credit-card bill fear.

But you don't have to replay the gift-giving, credit-card-spending tango each year. Next Christmas can be a time of joy for you and your wallet if you play it right.

"Nobody wants a gift you went into debt to get," said Paul Richard, the executive director of the Institute of Consumer Financial Education.

Proper planning throughout the year, budgeting and focused buying can save hundreds of dollars in wasted spending and finance charges, and if you start now, you can do away with those after-Christmas blues next year.

Now that your spending is done, sit down and see what you bought. Look at receipts for presents, gift wrap, decorations, holiday food, shipping, travel, etc., and figure out how much you spent.

Consider this your starting point for how much you will spend next year. Divide the number by 12, and you'll know how much you need to save each month.

Bear in mind that holiday spending increases each year.

In 2002, shoppers spent more than $281 million on December retail sales (excluding autos), compared with less than $180 million in 1992, according to the Internation-al Council of Shopping Centers.

Create a list of who you will need to buy gifts for next year and how much you will spend on them.

Then you can shop throughout the year and during after-Christmas sales. As items go on sale, buy and save them. Be sure to check off names on your list, and note what you bought.

"There are lots of bargains to be had throughout the year," Richard said.

Buying during the year controls your spending.

"If you avoid shopping in a hurry and getting caught up in the excitement of the holiday shopping season, you are more likely to stick to your plan," said Betty Ashley of Consumer Credit Counseling Services.

If you've bought gifts on credit, get them paid off as soon as possible. For each month you owe money on your credit card, financing charges accrue, meaning gifts keep getting more expensive after you've given them.

Ashley suggests setting a goal of paying off all Christmas debt within 90 days.

Be sure to avoid adding more debt to your credit cards, because doing so makes the cards more difficult to pay off.

A Christmas club account is a quick and easy way to save a portion of your income each pay period for Christmas. Money is automatically deducted from your paycheck or checking account, then is given back at the start of the holiday season.

"You don't even have to come to the bank once you have this set up," said Susan Bly, the vice president for deposit operations at Georgia Bank & Trust Co., adding that the account automatically restarts each year for its customers.

The money earns interest at the rate of a savings account, and most banks won't allow you to withdraw the funds without incurring a penalty.

"Christmas club accounts are good," Ashley said. "It's self-imposed, and you don't have to set the money aside; it is taken out for you."

Ashley warns, though, that if you're paying off a credit card bill, having money deducted for a Christmas club account can strain your finances.

So be sure you have extra funds in your paycheck to afford such an account.

Sometimes a homemade gift is more appreciated than a store-bought one. It shows you took time and effort to create something you thought the recipient would like, and it can save you some money.

"Because you have the whole year ahead of you, you have time to think of appropriate gifts that don't cost a lot of out-of-pocket money, such as photo collages of the year's events," Richard said.

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