You can hit the malls running, spend more than you can afford and get buried in credit card bills, or you can stick to a plan and a realistic budget for gifts this holiday season.
“When you don’t plan, spending for gift-giving can become a burden,” said Suzanne Boas, president of the not-for-profit Consumer Credit Counseling Service in Atlanta.
Before you go on a buying binge, Boas recommends you compare your income and savings to your credit card debt, living expenses and other financial obligations.
“This assessment should help you determine the number of gifts you can afford to give and the total amount you can afford to spend,” she said.
Here are a few more tips from Boas:
– Boost your holiday spending account. Ask whether you can work a few more hours for overtime pay. Or look for seasonal, part-time employment.
– Avoid shopping at the last minute. It often leads to more spending.
– Track your holiday gift expenses. Tally your receipts from credit card, check and cash purchases. Don’t spend more money than you set aside.
– Once you’re done shopping, stop. More mall time can amount to more spending.
And a couple of more tips from me:
– Don’t turn holiday shopping into a contest to see who spends the most. Make your gifts come from the heart, and give what you can afford.
– Take a clue from young children, who realize instinctively that a gift is not better just because it costs more. Haven’t you ever bought an elaborate toy for a child, only to see him play for hours with the box? Simple toys such as modeling clay, building blocks and crayons are often the most fun, particularly if you play together as a family. Along that family theme, I offer a couple of suggestions.
– Give shares of stock.
Despite a prolonged slump in the market, stocks of good quality companies represent one of the best ways to build wealth over time.
Parents can get a child started on the road to long-term stock investing by buying a few shares of well-known companies and registering those shares in the name of a child (the parent would be the custodian until the child reaches majority age).
Once an account is set up, dividends from the stocks can be reinvested in additional shares. Services designed for investors who want to buy a few shares at a time include the Temper of the Times Enrollment Service (information at 914-925-0022 extension 302 or at www.giftsofstock.com) and specialized discount brokerages such as BuyandHold and ShareBuilder (check out the Web sites www.BuyandHold.com and www.ShareBuilder.com).
– Help your children start their retirement plan.
If your grown children have income from work but are hard pressed to come up with the money to contribute to an IRA, you can give them the money as a gift. They just need to make sure their IRA contribution stays within the legal limit ($3,000 for 2002 and 2003) and does not exceed their income from work.
Harold Kline of Kansas City, Mo., started making this IRA Christmas gift in 1999, when his children, Brad and Cathy, were 33 and 28, respectively. He agreed to give $1,000 a year each for five years, while expecting the children to contribute at least $50 a month from their earnings. Assuming long-term market returns of 10 percent a year, a gift of $5,000 coupled with the children’s own contributions could create a nest egg of close to half a million dollars.
“The exercise will help overcome the largest obstacle to early savings for retirement: procrastination,” Kline said. “What better gift can you give your child than that?”
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Humberto Cruz can be reached at AskHumberto(at)aol.com or c/o Tribune Media Services, 435 N. Michigan Ave., Suite 1500, Chicago Ill. 60611.
