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Avoiding a financial ‘hangover’ this holiday season

  • Published
  • By Master Sgt. Julie Briggs
  • 20th Fighter Wing Public Affairs
The holiday season is one paycheck away. Unfortunately for some, what is supposed to be the season of cheer will end as the season of debt.

Avoiding this possibility takes financial planning, said Carolyn Bridges, 20th Mission Support Squadron Airmen and Family Readiness Center.

The best plan is to set aside money each month starting in January, Mrs. Bridges said. This way there is money to purchase gifts without having to use credit, take out a loan or "borrow" money normally earmarked for monthly household bills.

Sadly, however, Mrs. Bridges said there are people who don't use this plan and typically end up at her door a month or two after Christmas.

"I had one person come into my office in February asking for help in making a car payment and car insurance," Mrs. Bridges said. "This person was behind because he used December's car and insurance payments to buy gifts."

Mrs. Bridges said she has a 25-percent increase in the number of people she counsels in February and they all have one thing in common: they overextend themselves trying to pay for the holidays and they can't pay their bills.

According to the National Retail Federation, last year the average consumer spent more than $421 on family gifts, about $79 on gifts for friends, and more than $21 on co-workers' gifts.

Some people who haven't set aside money for the holidays, will run up their credit cards and, if they believe they don't have any other choice, they will elect not to pay their bills, Mrs. Bridges said.

There is a way to avoid this "financial hangover," Mrs. Bridges said. Develop a holiday spending plan.

"First, take a realistic look at your budget. This step is important because before you can make a decision on what to buy you need to know how much you have to spend," Mrs. Bridges said.

Cash is the best way to pay for holiday gifts.

"Credit card debt is relatively expensive and if you only make the 1.5 percent required monthly payment, you probably will never pay off the debt," Mrs. Bridges said.

"A lot of people justify using a credit card for holiday purchases because it gives them at least a month before the bill comes due. However, if you are not paying that bill off when it comes in, you will be paying interest on your credit card balance for years," she said. "A good rule is to limit your credit card use to what can be paid off in three to four months."

The Federal Deposit Insurance Corporation, www.fdic.gov, suggests that those who decide to pay by credit card or with a loan should plan to pay off their holiday debt before the holidays next year.

After coming up with a working budget, the next step is to make a gift list and set a limit on how much you're willing to spend on each gift, Mrs. Bridges said.

"A lot of military members buy for all their family members, especially when they go home for the holidays," Mrs. Bridges said. "A lot of times they go overboard, buying everything on their families' wish lists."

To avoid falling into this trap, if someone has several items on his or her list then pick one or two, Mrs. Bridges suggests.

Once the list is complete, the FDIC suggests doing some research before buying, especially with big purchases. "Read reviews in magazines or respected Web sites, talk to knowledgeable people, compare prices offered by several stores, including online merchants," the FDIC Web site advises.

When making the list, people often discover that their list is too long for the amount of money they have to spend. If that's the case, Mrs. Bridges suggests getting creative.

"If you or your spouse comes from a rather large family, ask them if they would be willing to draw names," Mrs. Bridges said. This way the list can be pared down to a reasonable number and with it the amount of money needed to make the purchase.

Another idea to save money is to make gifts. "Handmade items are often treasured because they take time and effort," Mrs. Bridges said. "Homemade baked goods are another alternative."

Yet another idea is "personal" coupons. "Create a coupon book offering to do chores around the house, baby sit or other gifts of your time," Mrs. Bridges suggests. "Giving your time is often more appreciated then a gift."

All this planning, however, can be easily derailed if one's not careful. So it's important that while out shopping to keep a running tally of how much as been spent as a way to stick to the budget, suggests the FDIC site.

While January may be the best time to establish a holiday financial plan, there's still time this holiday season.

"By developing and sticking with a holiday spending plan, you can enjoy the holiday season without suffering from a financial hangover," she said.