5 Ways to Avoid Holiday Overindulgence

by Andrew Housser
Co-CEO, Freedom Financial Network

Despite higher gas prices and a rash of natural disasters around the world, this year’s holiday shoppers plan to increase their average holiday spending to $681, up from $655 last year, according to The NPD Group. But shoppers who habitually charge their purchases to repay in the New Year may want to exercise a little extra caution this year because of increasing minimum credit card payments.

Beginning this quarter, most credit card issuers are instituting new policies that require minimum payments to cover interest, fees and a portion of the loan principal in each payment period. As a result, minimum payments on most credit cards will nearly double, from approximately 2 percent of principal balance to as much as 4 percent.

In this landscape, plastic is less appealing for gift-giving Santas – at least for those who use cards to shop beyond their means. Here are five suggestions to take the burn out of holiday gift-giving.

1. Crunch the numbers – Create a holiday budget by listing all your holiday expenses, including small gifts to teachers, babysitters, newspaper carriers and others. Don’t forget extras such as cards, food and beverages for entertaining, and holiday clothing purchases. Set a spending limit for each person and each item on your list. Don’t be pressured to overspend based on what you think others expect – that’s often when credit card debt begins to mount.

2. Think big picture – In this year of hurricanes, floods and mudslides around the world, the time is ripe to remember that the holidays should be about relationships, not loot. Talk with family and friends about setting limits and about gifts of time instead of letting gift exchanges lapse into a dollar-for-dollar matching competition. If your list looks skimpy, fill in with homemade presents or offers to help the recipient, such as babysitting, yard work, home-cooked meals or help putting away holiday decorations.

3. Start early – Really smart shoppers stock up gifts throughout the year. If you haven’t done that, do yourself a favor and avoid the last-minute rush. In doing so, you'll have time to comparison shop. You’ll spend more – and use the credit card more – if you’re in a panic to find the right gift, or just to get out of the mall.

4. Exchange, unite, be creative – Americans have an average of 9.8 people on their gift-giving lists. Some families, however, have success with each adult buying a gift for just one other adult relative. Trade partners every year so no one gets stuck forever getting Aunt Tilly’s fruitcake. Or for those big-ticket items that someone absolutely must have (iPod, anyone?), consider pooling resources rather than splurging yourself into debt.

5. Be a quitter – When you hit your budget limits, stop. If you need hard-core support to keep yourself in check, leave credit cards at home and put each person’s budget in an envelope, in cash. When it’s gone, it’s gone – and you’re done.

Running up a big bill to celebrate the holidays and then paying it off at a leisurely pace is likely to cause financial heartburn – the sour sensation that your holiday overindulgence is taking way too long to leave your budgetary system. But if you follow these steps, you can finish your shopping still feeling satisfied. Your season will be full – of joy and togetherness, not the anxiety that accompanies over-charged credit cards. Best of all, your New Year will be debt-free. Ho ho ho!

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Freedom Financial Network, LLC (www.freedomfinancialnetwork.com) provides consumer debt resolution services through its Freedom Debt Relief, Freedom Foreclosure Relief and Freedom Tax Relief divisions. Working for the consumer and negotiating with creditors to lower principal balances due, the company offers an alternative to bankruptcy, credit counseling, and debt consolidation. Based in San Mateo, Calif., Freedom Financial Network serves more than 3,000 clients nationwide and manages more than $100 million in consumer debt.

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CONTACTS:

Brad Stroh,
Freedom Financial Network, LLC
650-571-0961, x210
bradford@freedomdebtrelief.com