Q: I've budgeted $400 to buy holiday gifts, and I hope to end the season with very little new credit card debt. Is there anything else I need to worry about?
A: Many people have become good at planning their holiday gift spending. But they often forget to budget for all those other holiday expenses, from the cost of a Christmas tree to the price of a plane ticket home.
If you don't watch out, those "miscellaneous" expenses can equal - or exceed - your gift budget. Experts suggest that consumers take a holistic approach when estimating holiday costs.
A recent survey for the Million Dollar Round Table, an international association of life insurance and financial services professionals, found that 60 percent of Americans don't develop an overall spending plan for the holidays and that 30 percent expect to go into debt to finance their purchases.
"People do plan a little, which is better than nothing," said John H. Putnam, a financial representative in Charlotte, N.C., who is a member of the MDRT. "We want them to do more because ultimately they'll benefit financially."
Beyond gifts, what don't people budget to buy? Putnam mentions the following:
- holiday decorations
- postage and delivery fees, which can be especially high for last-minute purchases
- food and drinks for parties, along with party clothes
- baby sitters for holiday nights out
- travel costs, whether by car or plane to visit relatives and friends.
- movies and videos for children during the holiday vacation season
- year-end tips to the hairdresser and newspaper delivery boy
- charitable donations
Paul Richard, executive director of the Institute of Consumer Financial Education in San Diego, said many consumers don't take into account the high cost of holiday food.
He suggests families check store ads and flyers for specials and take advantage of coupons and rebates. He notes that "prepackaged foods can cost 10 to 20 times more" than those sold in bulk and that seasonal fruits and vegetables are the most affordable.
A pet peeve of his is that "some people will spend as much on the gift wrapping and delivery as on the gift."
His suggestion: "If you're wrestling with a big, bulky item, put a picture of it in an envelope and give that. Then you can get away with just a bow on your big box or appliance or whatever and keep it hidden until after the envelope is opened."
Richard also recommends families stop sending greeting cards to people they see all the time and limit them to those who live far away. "It cuts down on the expense of cards, postage - and time," he said.
Watching your budget doesn't mean you have to be a Scrooge at the holidays, he added.
"A lot of my friends, when they want to have a party, make it BYOB (bring your own bottle) or potluck," Richard said. "People enjoy that."
And, he suggests, rather than exchanging gifts at the office or taking up a collection for an office party, workers can pool unneeded canned goods and small cash donations "to help someone in their community."
The Million Dollar Round Table's Putnam said those who try to get their holiday spending in hand this year will not only face a new year without added debt but also will be in a position to be proactive about next year's holiday spending.
"If you know you're going to spend about $1,000 for the holidays, start right away in January to set aside $80 a month - your own Christmas club - and you won't have to worry about holiday debt again."
On the Net:
MDRT consumer site: www.soundfinancialplan.com