You've budgeted fanatically, spent judiciously, whittled down debt, and now the holidays are here. If you're holding credit cards with unused credit lines, this can be a dangerous time.
Stores are stocked with enticing items, the kids are clamoring for gifts and even your spouse is hinting at something special. A voice whispers to you, "Loosen up. It's the season for giving. The cards are right there in your wallet. Just use them!"
Hold up, Santa. Random charging is never a good idea, but in this economy, it's particularly foolish. Here's how you can hold the reins and ring in the New Year on a financially sound note.
Set your limits. Even if you've already begun shopping, take stock of your remaining funds and determine a total and a per-person spending allotment. "I've capped gifts at $50 to each of my kids and my nephew," says Naomi Derner from Portland, Ore. She also conferred with friends. "I've asked them if we can limit the gift cost to $15 -- so token gifts or homemade only." Such communication takes the pressure to overdo out of the equation. Cutting back on nonfamily presents also works for Jeanne Sager, a consumer and family reporter from Callicoon Center, N.Y. "We've told people in advance there would be no gifts, and we don't expect anything in return. It sounds grinchy, but I've found a lot of people are relieved not to get another stupid candle!"
Goal-ify your card. Sure, the holidays seem terribly important right now, but they'll be just a memory before you know it. Racking up high debt this month can impact what is really crucial -- your long-term objectives. Think about where you want to be financially by the end of 2010. Then, write those goals down on small Post-its and attach them to your credit cards. Each time you reach for the cards, the notes will serve as reminders of what you really want to do with your money.
Stash the plastic. Before hitting the stores, you just may want to rid your wallet of credit cards entirely and take your debit card instead. This way, you can only spend up to the amount in your checking account and avoid the temptation to charge more. You won't be the only one adopting this technique: A survey conducted by the National Retail Federation found that one-fourth of this year's holiday shoppers said they'll be using only cash, and 43 percent will use debit cards.
Shop with points. Have a credit card that has allowed you to earn points for travel and other goodies while you charge? If so, and you've accumulated a fair number, now may be the perfect time to cash them in. Most rewards programs provide cardholders with an amazing catalog of gift items. Browse through their offerings and shop for the holidays without dropping a dime of your "real" money.
Lower the line. If your balance is zero, yet you have the ability to charge $10,000, spending a grand of that can seem pretty reasonable -- even if you can't pay it off until 2011. However, if your credit line is $1,000, charging the maximum doesn't feel quite as right. Though drastic, you can ensure you don't overdo it by asking your credit card company to reduce your credit limit. After all, you can't charge what you aren't allowed to charge without incurring expensive over-limit fees. There are some drawbacks to this method though: It could affect your credit score, and if you want that big line back, it may not be available.
Plan with your partner. It's all well and good for you to keep charging in check, but is your partner doing the same? A new survey from Capital One Financial Corporation examining the financial habits of couples found that 55 percent of those surveyed have not yet discussed their holiday shopping budget with each other. Carve out time for a couple's discussion, says Shelley Solheim, Capital One's director of financial education. "Make sure you are on the same page with your partner about spending limitations," says Solheim. Setting goals together during this season can prevent added stress or disagreements -- and unnecessary liabilities.
Prep your kids. If you tend to overshop because you don't want to disappoint your kids on the big day, hold a family meeting to discuss what the holidays really mean, as well as your financial boundaries. Bob Brooks, host of "The Prudent Money Show" radio program and author of "Deceptive Money," says parents often make wrong assumptions about what kids value. Younger children usually just like ripping open wrapping paper, so inexpensive gifts can suffice. For older kids wanting costly items, consider this a teaching moment. "Let them know what you have to spend, and ask them if they think it makes sense to get into debt for what they want," says Brooks, and give them the option of one big gift or several smaller ones.
Stuff the stocking stuffers. Some of the sneakiest budget killers are the last minute, quick-pick-up items you buy on a whim or out of guilt. These include fillers for stockings and gifts for those who aren't on your list but who surprise you with a present. It's easy to get caught up in impulse shopping, so think hard about each purchase, however small. Little things add up quickly and can cause unplanned-for debt.
The calendar will soon turn to 2010, and December's bills will be in the mail. Project how you'll feel when they arrive: Will you be in a panic because the balances have ballooned, or relieved that you maintained a healthy relationship with your credit cards?
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