Holiday Shopping & Money Spending Tips

The holiday season is upon us. Mixed in with the spirit of giving, and all the joy it brings, is another ingredient not nearly as welcome. It is the spirit of spending that can easily get out of hand. Though you may enjoy the intoxicating pleasure of bestowing gifts on friends and loved ones, expect to experience a hangover afterward as the bills present themselves for payment. The time to prevent this is now, before the cork is out of the bottle and the spending begins. Though the pressures can be formidable, there are five specific things you can do to limit your exposure.

Money Saver Tip #1 - Set your total spending limit now.

In deciding how much to spend on a project, there are two fundamental ways to go about. You can use the standard government method: determine what you must accomplish and then raise the money to do it. The results are predictable: cost overruns, changes in scope, unrealistic estimates, and spending out of control. Of course no one is seriously affected when a governmental agency does this because, as it’s out of the taxpayers’ pockets, it isn’t real money. However, your holiday expenditures are not so favored, as this money is out of your pocket and very real. For this reason, you’ll want to use the alternative method: determine up front how much to spend and then arrange your purchases to fit within that figure. There’s probably no better way to arrange this than by actually setting your holiday funds aside as a stash of cash. This forces you to make your purchases carefully while weighing alternatives. When the cash runs out, your holiday spending is over.

Money Saver Tip #2 - Don’t make any holiday purchases with a credit card.

Credit cards are insidious. They are too easy to use and abuse—and not by accident. The marketing of these plastic devices over the past several decades has proven to be the most effective sales effort ever perpetrated on the public. Their systematic misuse is one of the primary causes of financial distress, for which millions of Americans pay out billions of dollars in interest, fees, and penalties annually. These contrivances are painless to use and can easily cause you to ignore your spending resolutions. A good rule to observe during the holiday season is to lock your credit cards in a secure storage place and entrust the key to someone who won’t return it until after the season.

Let me add a further caution for you to consider during the rest of the year. It’s my belief that a credit card serves a single purpose: a convenience when neither cash nor check is readily available. Purchases should only be made so that the account balance is paid in full each month before any interest can be charged. Conduct your life by this rule and the credit card is a useful device. If you cannot do so, cut up all your cards with a scissors and adjust your life accordingly.

Money Saver Tip #3 - Be extra careful with bargains.

The holiday sale is a traditional event, with advertised prices presumably slashed to encourage shoppers. A standard claim is the offer of “50% Off!” What is not revealed is that before-sale prices are often drastically increased before a sales price is set. If, for example, an item’s regular floor price is doubled prior to the sale, then 50% Off merely returns it to the regular price. To ensure that you’re getting a favorable buy requires that you compare it with similar merchandise elsewhere. You can’t simply take the merchant’s word for it. To do so puts you in the same league as Mammy Yokum, the late cartoonist Al Capp’s gullible hillbilly character, who declared: “Anything fo’ half price is a bargain, irregardless of what you pay fo’ it!”

Money Saver Tip #4 - Not all vendors are created equal.

What and where you buy are critical factors. Whether your choice of lipstick is the $25 Chanel selection from Macy's, the $7.50 Max Factor brand from Rite Aid Drug, or the $1.39 Wet 'n Wild tube from Target, recognize that the essential ingredients are the same. The difference is packaging, promotion, and mystique, which is what the cosmetics business is all about. Similarly, you may often choose between a recognized brand name and a generic or little-known comparable product. If your preference in mouthwash is mint-flavored Scope, the 24-ounce bottle can be purchased at one well-known chain for $5.99. On the shelf two feet to the right is a 24-ounce bottle of mint-flavored Value Wise at $2.99. Thanks to federal law, labels list the ingredients. Are you surprised to learn that the contents of the two bottles are identical? As to flavor, there is no detectable difference. The likelihood is that both are manufactured and bottled together in the same plant and from the same spigot. Whether it is so in this particular case is less important than that the marketplace is rife with this practice, maintaining huge markups solely on media-promoted brand loyalty. Your holiday shopping will be less traumatic if you keep this in mind.

Money Saver Tip #5 - It’s time to prune your gift list.

Are there persons with whom you exchange gifts more out of habit than intent? You haven’t seen Cousin Ned for twelve years, but you still mail off an annual two-pound box of chocolates to him while invariably receiving three embroidered handkerchiefs in return. This might be a good year to break the habit. Early on, change it to a Christmas card with a cordial letter. The likelihood is Ned will be as pleased as you. Finally, scrutinize your gift list closely. Exchange of gifts between both loved ones and close associates has meaning. Extending this to casual acquaintances and various relatives loses significance.

By Al Jacobs. Al Jacobs is the author of Nobody’s Fool: A Skeptic’s Guide to Prosperity. Subscribe to his financial column, "On the Money Trail," at no cost or obligation, by visiting www.onthemoneytrail.com.