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The Honolulu Advertiser
Posted on: Thursday, November 18, 2004

Joy of giving can get out of hand

By Luladey B. Tadesse
Gannett News Service

Heather Smith has already begun shopping for Christmas presents.

Holiday budgeting tips

• Make a list of the people for whom you are buying gifts.

• Create a budget and stick to it.

• Don't wait until the last minute to start shopping; you will miss the best deals.

• Try to avoid using your credit card.

• Keep track of your spending.

• Be creative with your gifts; offer your time or services, or make your own presents.

She and her husband, LeRoy, have decided to spend at least $300 more than they did last year, but want to stay within their $1,000 budget. So the money will go mostly toward clothes and toys for their 2-year-old son, Jaden, and cash gifts for close family.

"(LeRoy) wants a laptop," said Smith, of New Castle, Del. "I said, 'You are not getting that.' It's too pricey right now and he already has a computer."

About a third of American consumers start shopping for the holidays this month. And many consumers are expected to stretch their wallets a little further this year. But financial planners advise consumers to take a close look at their finances before they begin racking up gift purchases.

"We work so hard trying to get everyone to get a budget and savings," said Evelyn Baldwin, who teaches personal-finance workshops, including shopping for the holidays, at the YWCA in Wilmington, Del.

But many consumers' financial goals tend to fall by the wayside when it comes to the holidays.

Before shopping, consumers should create a budget and calculate how much they can afford to spend on gifts, experts said.

The budget should be detailed and include spending limits on specific items — such as gifts for individual people, decorations, party clothes and food.

Ideally, consumers should plan ahead and set aside holiday gift money during the year based on how much they spent the year before. Regardless, consumers should have a dollar amount in mind for particular gifts before walking into a store. Vague budgets and gift ideas lead to overspending.

According to America's Research Group, a consumer behavior research firm in Charleston, S.C., 38 percent of consumers usually spend more than they planned during the holidays.

One reason is that they wait until the last minute to shop for gifts.

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 survey released last month by the National Retail Federation.

Total holiday spending this year is estimated to reach $220 billion.

Many consumers will pay for gifts using 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 Inc. in Fort Lauderdale, Fla.

Consumers who can't afford the minimum payment on a credit card, 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 gifts, let alone using a credit card, said Howard S. Dvorkin, founder of Consolidated Credit Counseling Services.