This will be the fourth holiday season of the great slump, and for many it isn't getting any easier. Times are tough. So how can you stop the Grinch from stealing Christmas this year? Here are seven smart money tips to get the most bang for your (diminished) bucks this holiday season.
1. Set a gift budget.
And stick to it! Too many people blunder into Christmas backward, with an open budget and an open wallet.
"One of the worst mistakes is to make a list of everybody you want to buy presents for, and then to go down to the mall and start buying," says Jim Heitman, a financial planner in Alta Loma, Calif. "It's a disaster."
No wonder so many people spend a fortune during the holiday season -- and wake up in January with a horrendous credit-card bill.
You'll be better off if you work out in advance what you can afford, set a budget and work with that.
As for sticking to a budget -- everyone has preferences, and I have mine. I leave the plastic at home. Only take cash to the mall. If you can't spend the money, you won't. Simple. Willpower doesn't even come into it.
2. Negotiate a gift truce among adults.
"Lose the guilt on how much you might not spend this year," says Elaine Scoggins, a financial planner in Seattle. "It's a rough year for lots of people."
And she adds: "Think about how few of last year's holiday gifts are now really valued by you, your family or your friends. Can you even remember what you gave? What you received?"
If you can't negotiate a truce, dial down the number of presents. "Consider pulling names so you are only buying for one person instead of the whole family," says Lauren Lindsay, a planner in Covington, La.
3. Focus on experiences instead of "things."
Give cooking classes. A spa treatment. Tickets to a game.
Studies and common sense consistently show that these get a lot more bang for your buck than mere store-bought items. Why? Psychologists find that experiences tend to gather luster in our minds over time.
Meanwhile, stuff gathers dust in a hall closet.
Don't believe me? Go on eBay and see how much last year's "must have" gadget is now selling for. So "take the focus off buying so many gifts, and think of a new ritual for the holiday gatherings," says Donna Skeels Cygan, a planner in Albuquerque. "Maybe it could be spending the day baking cookies or old-fashioned cinnamon rolls, or having everyone write down a happy memory from the past year."
Ms. Scoggins recalls: "One of the best, most relaxing holidays my family ever had was when we all agreed to hold down the gift giving, get up early on Dec. 25 and drive to a nearby and inexpensive place to ski.
"We skied all day with our adult daughter and had a blast. If you get the choice, opt for time spent together building memories versus giving stuff that leaves you drained of your hard-earned cash."
4. Set up funds for the children (or grandchildren).
If you have young children or grandchildren, this is a great time to set up 529 tax-sheltered college savings plans for them.
That'll give discipline and focus to saving, and save on taxes. The money will also stay under your control.
Does this seem too serious for the holiday season? Remember that over the past 30 years, college costs have grown six times faster than middle-class incomes. A 529 plan will attract gifts from friends and relatives who may otherwise struggle with gift ideas for your kids.
Andrew Feldman, a financial planner in Chicago, tells parents: "When grandparents or friends and other relatives ask what to get Junior for the holidays, ask for a 529 contribution."
Meanwhile, if you have teenage children or grandchildren, Bonnie Hughes, a financial planner in Reston, Va., suggests you help them open their first Roth individual retirement account to help them start saving -- and promise to match some or all of the contributions they make in the next year.
5. Make your charitable giving more effective.
This is the time of year when people give the most to good causes. But do you do it most effectively?
Don't just be reactive. Hunt out and research organizations you want to support. Plan in advance. Solicit ideas from family and friends.
Mark Joseph, a financial planner in Reston, Va., says he encourages clients to "take a year from giving people stuff they don't really need and...give the gift of giving."
Make donations to charities of their choice. One way to do this, he says, is through a program like Fidelity Investments' Charitable Gift Fund's "Gift4Giving."
6. Give cashless gifts.
"My brother-in-law baked us cookies for a number of years," says Mr. Heitman. "He gave us all a basket of cookies each year, and we loved it. He had a small business, a start-up, and he didn't have a lot of money."
The cliches are right. It's the thought. Ms. Lindsay in Louisiana agrees. "Give of yourself," she says. "Baked goods, soups, flavored olive oil, knitted or sewn items, pesto...these are all lovely gifts to receive, and cost less to make than to buy."
She recalls "when my friends were having babies and I was still single, I would give them babysitting time as presents." Financial cost: Zero dollars. Value: Priceless.
7. Be a smart shopper.
It's too easy to lose your discipline during the holiday season.
Rick Kahler, a financial planner in Rapid City, S.D., says we are especially vulnerable to making money decisions blindly at this time of year. "We are surrounded by expectations and pressures about 'ideal' holiday celebrations, with the perfect gifts, the perfect decorations and the perfect foods."
He says it's particularly important to recognize the subconscious beliefs trying to push us around. After all, a dollar is a dollar at every time of the year.
So if you're traveling, book as early as possible and try to fly on Wednesdays, says Ms. Lindsay. It's cheaper than traveling on weekends.
Don't just splash out on items. Research prices online to make sure you're getting the best deal. And look for online deals and coupons.
And go to the store the day after Christmas to buy wrapping paper and cards 75% off...for next year.
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