Shoppers trim their budgets for the holidays

PERSONAL FINANCE

November 25, 2001|By EILEEN AMBROSE

LILA Turner says her family doesn't splurge on spending during the holidays, but this year there are even more reasons to keep things simple.

"September 11 has a lot to do with it. You start thinking a lot about priorities. Family and friends are the most important thing and appreciating what you have," said the Dickerson mother of two.

Turner also is not eager to help businesses that are getting federal bailouts or huge tax breaks under a proposed economic stimulus package while laid-off workers get little support.

"I don't feel like spending money or being a consumer this year," said Turner, who plans to make more of her gifts this holiday and keep expenses down.

She may have a lot of company. Surveys show that consumers plan to spend less this holiday season, despite being told that it's almost their patriotic duty to shop the economy out of its doldrums.

The average holiday shopper expects to spend $773 on gifts this season, down from $1,220 last year, according to Myvesta.org, a debt management group in Rockville.

A recent poll by the Center for the New American Dream found that 85 percent of those surveyed said the holidays should focus on friends, families and meaning, while only 8 percent said the season should be used to stimulate the economy. And 70 percent wanted to help the economy, but worried about overspending and going into debt.

"Americans are tiptoeing into the holidays this year," said Eric Brown, with the nonprofit New American Dream in Takoma Park.

While that's bad news for retailers, it's good for those consumers who go so overboard on spending during the holidays that they still may be paying last year's bills when next year's season rolls around, experts said.

Reducing spending or simplifying gift-giving doesn't necessarily mean a Cratchit-family style holiday. "This is not about shivering in the dark and knitting sweaters out of mopheads," Brown said.

Experts offer ideas on keeping costs down while still enjoying the holidays:

The surest way to make sure you don't overspend is to set up a plan before hitting the malls. Figure out how much you can afford for gifts and other holiday-related costs, such as travel, wrapping paper, postage, food and decorations.

Make a list of people you will buy gifts for and how much you plan to spend on each, said Bill Sauer, a management professor at Susquehanna University in Pennsylvania. Your budget may require that you buy less expensive gifts or scratch some names off the list, he said.

Decide what you want to buy each person and at least two alternative gifts if your first choice isn't available. "When you don't find what you want, you will just look at something else. And that something else may be 15 or 20 percent more," Sauer said.

Shop early. That gives you time to comparison shop for the best price and selection.

Avoid using credit cards that can rack up interest charges, Sauer said.

But plastic is convenient. If you use credit cards, do so wisely.

Myvesta.org recommends carrying only two cards: one for purchases that will be paid off in full and the other, a low-rate card that will be paid off in three to six months. Use a major credit card rather than a department store card that typically carries a higher rate, said Myvesta.org's president, Steve Rhode.

Avoid making only minimum payments on plastic, which is a costly mistake. If someone made only minimum payments after buying $773 worth of gifts on a card charging 14.9 percent interest, it would be more than 11 years and $732 in interest before the bill was paid off, Rhode said.

Shun offers from credit-card companies that allow you to skip a payment during the holidays, Rhode said. "Interest accrues and your balance goes up. It's Christmas time for the credit-card companies," he said.

Ignore "buy now, pay later" deals, too, which encourage people to impulsively buy more than they can afford, Rhode said.

Don't open a credit account to get a one-time discount, which makes it easier to spread debt across more cards and get deeper in hock. "It's not a good financial move for you unless you ... open the card, get the discount and close the account," Rhode said.

Of course, you can avoid going into debt by giving presents that cost little or nothing but may be valuable to the recipient.

"If you want to give someone a gift that truly matters, don't give them this special millennium set of Isotoner gloves; give them a gift of your time." Rhode said.

Take someone out to dinner or to lunch or a play, experts suggest. Give homemade gifts, such as baked goods or a photo album with family pictures.

Give family members coupons for chores you'll do for them, such as washing a car or driving an elderly person to the grocery store, said Nina Heck, senior counselor with Consumer Credit Counseling Service of Maryland and Delaware.

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