Holiday budgeting made easy

THE holidays are here! It's time to put up the Christmas lights, trim a tree, prepare delicious treats and shop till you drop. Keep in mind that all of these festivities associated with the merriment of the holiday season could put a big dent in your household budget.

According to the Federal Reserve Bank, even before last year's holiday shopping season, Americans had more than $700 billion in credit card debt. David Henson, principal and founder of Wealth Management Network, says Americans rack up 50 to 60 percent of all their credit card debt during the Christmas holiday season, but adds that no one has to go broke during the holidays. By taking a few simple steps, you can celebrate the holidays without going into debt.

Become Frugal, Not Cheap. Gift exchanges are the perfect way to reduce the number of presents you have to buy. By shopping at retail stores that offer free gift wrapping and by buying gift cards, you can avoid the hassle and expense of wrapping paper. "A frugal person operates competently acts within their economic means," Henson says, "whereas a cheap person, who is unknowledgeable, makes poor economic decisions."

Open a Christmas Club Account. Let your bank do all the work. Budget your money with virtually no effort by setting up a Christmas club account. "Opening a Christmas club account reduces at least half of the holiday craziness that tends to happen; you may not know what you're going to buy, but you will know how you're going to pay for it," says Glinda Bridgforth, financial advisor and author of Girl, Make Your Money Grow! and Girl, Get Your Money Straight. "By putting a small amount monthly into the account [I recommend by automatic transfer], the money will hardly be missed. Over the course of a year, it adds up to a nice chunk of change that funds holiday expenses and gift-giving."

Don't Count on Money You Don't Have. Never base your holiday budget on year-end bonuses and raises, or an increase in your credit card limit. Even with the best of intentions, sometimes things don't go the way we plan, warns Bridgforth.

Create a Realistic Budget. Make a detailed list of gifts, food, entertainment, decorations, travel expenses and that skyrocketing gas bill. "Target the amount that you want to spend, and then allot a certain amount of money per item, or per person," advises Pierre Dunagan, founder of the Dunagan Group. Also, consider paying cash for your purchases; people who use cash tend to spend less.

Shop Year-Round. Don't wait until the last possible moment to do your shopping. Throughout the year, purchase holiday gifts when you run errands and peruse the Internet year-round for bargains. Consequently, you will have time to comparison-shop. Most importantly, you will avoid the stress of last-minute shopping, outrageously high last-minute shipping and handling fees, and an overdrafted bank account, Dunagan says.

Give From the Heart And Become Mindful of Money. Create cherished gifts that don't drain your savings. For instance, bake treats for acquaintances and purchase blank cards and write personal messages for your closest friends and relatives. "In my family we adopt another family in need through our church or local paper on both Thanksgiving and Christmas," says Harriette Cole, author of Coming Together: Celebrations for African-American Families: Christmas, Kwanzaa, Family Reunions, and Naming Ceremonies. "We pool our money together and buy practical gifts that benefit the recipients."

The holidays are a time to give, but it is also time to connect with loved ones. "Spend more time truly reflecting on family and friends, rather than money," says Cole.

COPYRIGHT 2005 Johnson Publishing Co.
COPYRIGHT 2005 Gale Group