Cut your holiday gift costs

One interesting – albeit non-scientific – way to gauge someone's comfort level with the state of the economy is to ask how much they plan to spend on holiday gifts. In good times, people tend to spend more generously; during rough periods, they scale back.

Those trends were borne out in a recent consumer survey conducted by Visa Inc., which found that shoppers plan to spend an average of $934 on gifts this holiday season, down about 11 percent from last year’s $1,051 average. That jibes with bleak industry forecasts for the upcoming shopping season.

If you're among those looking for ways to manage your holiday spending while still finding meaningful gifts for your loved ones, read on:

First, consider your overall finances. Before spending a dime on gifts, step back and calculate how much you can afford as a portion of your overall budget. Consider questions such as:

• Are your savings sufficient to cover expenses for a few months if you or your spouse should get laid off or have unexpected medical expenses?
• Would you be able to pay off all gifts within a couple of months?
• Are you already struggling to pay your monthly bills?
• Would you need to suspend retirement savings contributions in order to buy gifts?

 

If you answered "no" to either of the first two questions or "yes" to the others, this probably isn't a good year for extravagant spending.

Make a list. Once you decide how much you can comfortably afford to spend on gifts overall, list all the people you need to shop for, including a few gift alternatives – and their costs – for each person. I call these 'micro budgets.' Remember, if you overspend on one present you'll need to make up for it somewhere else to balance out.

Comparison shop. Retailers are likely to offer deep discounts to lure wary shoppers, so check newspaper ads and store websites frequently for sales and coupons. Comparison shopping websites like www.shopping.com, www.shopping.yahoo.com and www.pricegrabber.com are also good resources – plus, they may provide good gift ideas for hard-to-shop-for individuals.

Online coupons. When shopping online, look for the "coupon code" box at checkout. Numerous shopping websites post coupon codes (as well as printable hard-copy coupons) for hundreds of online and in-store retailers. By quickly searching a few such sites (including www.mybargainbuddy.com and www.dealcoupon.com), you might find significant discounts on items you're about to buy.

Cash in frequent flyer miles. One good way to use up your airline miles before they expire is to redeem them for cash or merchandise. Check out your airline's miles program website for details – you might just find an appropriate gift for someone on your list.

Credit card rewards. Similarly, if you're amassing reward points through your credit card, check out its online merchandise catalog or consider cashing out the points for cash or gift certificates.

If you need help creating a holiday budget, visit Visa's free personal financial management site, Practical Money Skills for Life, (www.practicalmoneyskills.com/learn/budgeting/seasonal_budgeting/holiday) where you'll find easy-to-follow budgeting, holiday entertaining and travel planning tips as well as interactive calculators to track your spending.

And finally, have heart-to-heart discussions with family and friends. They're probably just as concerned about overspending. In fact, maybe this is a good year to exchange charitable contributions in each others' behalf to show how thankful you are for what you've got.