December 30, 2011

12 Days of Tips: Part III

To many, the holidays are synonymous with shopping. It’s easy to go overboard buying gifts for all of your family and friends. These tips will help you get a handle on your holiday spending and protect your finances.

Determine Your Holiday Budget

Before you hit the stores, be aware of how much you plan to spend. Look at your current budget and factor in how much you spend on food, utilities, rent, credit cards, loan payments, and other expenses. Once you have all of this information, figure out what you can spend for the month. Now you’ll know how much you can use on gifts.

If you need help working on your budget, use the budget worksheet and budget calculator.

Make Your List

It may be better to give than to receive, but too much giving can be bad for your finances. It can be hard to control your spending, but following these tips can help you manage your holiday shopping:

  • Make your list and check it twice. Narrow your shopping list down to your family and closest friends.
  • Determine how much you can spend on each person.
  • Record your spending and be sure to stay in your budget.

These steps will help you shop wisely for gifts. If there are still people you want to get gifts for, consider creating homemade crafts or holiday treats, like fudge. You don’t need to spend a lot to make your loved ones happy.

Shop Smart With Credit Cards

Throwing all of your shopping expenses on credit cards might seem like an easy fix for holiday spending, but being loose with your credit cards can lead to steep fees and high debt. 

Credit cards can come with a high interest rate or annual percentage rate (APR)— around 15%. If you take several months to pay off the purchase, the interest will be compounded, which means you’ll pay interest on the interest you accrue. By the time you pay off the entire balance, you could end up paying more than the original cost. So be sure to limit your spending and pay off your bills on time, if not earlier.

When you use plastic, try to limit yourself to one card. This will make it easier to pay off bills and limit your exposure to high fees. Lastly, avoid store shopping cards— they can have APRs of up to 25%!

Watch Your Back

When you’re shopping, it’s easy to become distracted by the crowds, sales, and colorful displays. But you should remain vigilant to avoid becoming a victim of identity theft. These thieves can ruin your credit, steal money, take out loans or insurance policies in your name, and even buy big ticket items—like a car! The holidays often see a rise in identity theft, so follow these tips to protect your identity:

  • Keep an eye on your stuff. 90% of thefts occur offline, so be mindful of your wallet.
  • Memorize your license number, Social Security number, and debit/credit card numbers.
  • Create complicated PIN numbers.
  • Leave any unessential cards at home while shopping.
  • Be sure no one is looking over your shoulder while you are typing your PIN number.
  • Monitor your bank and credit card activity; watch for strange charges.