Avoiding Holiday Debt

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ANGELA: This is the time of year when people spend a lot of money on Christmas presents and holiday spending. How can folks prevent overdoing it and not have a debt hangover in January?

BRUCE: The simple answer is to limit your spending and pay for everything with cash, but that's easier said than done.

ANGELA: Is there a tried and true method for doing that?

BRUCE: The key is to plan ahead for your shopping and there are three important steps to that:
· Review your household budget to determine how much you can afford to spend during the holiday season.
· Identify the exact source(s) of your spending money so that you can be confident of having enough cash when the time arrives.
· Create a list showing the people for whom you'll buy gifts and the amount budgeted for each.

ANGELA: Many of us have extended families and by the time you buy for nephews, nieces, aunts, uncles it can be overwhelming.

BRUCE: Yes and there are a couple of ways of handling that. Some families reach an agreement that gifts will only be given to everyone's children, no gifts over age 21. Then if you want to do something for the adults you could give home made cookies or pies. On my wife's side of the family we put everyone's name in a hat and have a drawing. The rule is you can spend up to $75 on the person whose name you draw. That way everyone gets a present but no one has to spend too much and can have more money to spend on your immediate family.

ANGELA: What about saving money by shopping online?

BRUCE: Certainly that's an option and even if you choose to do business with local retailers it's not a bad idea to do some price comparison online. And of course take advantage of sales, coupons, senior citizen discounts, etc. Also, Christmas shopping doesn't have to begin the day after Thanksgiving. If in July you see a super bargain on something that would be perfect for a particular person, take advantage of it then.

ANGELA: Many of our viewers make charitable contributions this time of year. Any tips for them?

BRUCE: For tax reasons consider making a gift of an appreciated asset if you have one instead of cash. The charity may not have to pay the capital gains tax you would have had.