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Staying off the naughty (spending) list



9 ways to manage your holiday finances


The holidays are upon us, bringing all those images and sensations we cherish - the glow of the menorah, the fragrance of home-cooked meals and sugar cookies, and the sounds of the season in holiday songs, laughter, and shrieks of joy from kids discovering Santa's generosity. But for many of us there are a few not-so-joyous holiday sights (a purse overflowing with credit card receipts) and sounds (the ca-ching! of the cash registers marking our escalating debt). These negatives can easily outweigh all that we love about the holiday season, especially when we consider the financial consequences we'll still be suffering long after the last gift is opened.

"Americans already spend more than they can afford," says Tyson, author of the new book "Let's Get Real About Money! Profit from the Habits of the Best Personal Finance Managers" (FT Press, 2007, $19.99). "Our national personal savings rate is negative 1 percent. Many people already owe money going into the holiday season so the annual shopping spree just adds insult to injury."

But despite the fact that many of our coffers aren't exactly bubbling over, a recent Gallup Poll shows that few of us are planning to temper our holiday spending. The poll shows that on average Americans expect to spend around $909 on holiday gifts this year. Whether it's a dedication to the gift-giving tradition, a sense of obligation, or a feeling that the holidays entitle us to have a little more fun than usual, too many of us seem to turn a blind eye to the bank-busting reality of all that spending.

Guess what? You don't have to join in the spending frenzy. What if you could have a wonderful, memorable holiday and avoid the financial hangover afterwards? Tyson provides great tips on how to keep your holiday spending in check.

READ MORE: Avoid holiday spending stress

1.
Find an alternative to gift-giving during the holidays. Many people feel they have to give gifts during the holidays, either because it's a family tradition or because they know their friends and relatives have gotten gifts for them. There are plenty of great ways to trade in this tradition for another one that is even more meaningful, and chances are your family and friends will be happy to save gift-buying dough as well.

"Instead of exchanging gifts, your family might want to pool their money and spend the money on a holiday outing," says Tyson.

2.
If you must buy gifts, cut your expenses elsewhere. Perhaps you'd rather dine out or go to the movies less, or maybe you can forego that new pair of shoes you've been wanting for yourself in order to afford gifts.

"It doesn't matter where you make cuts, just that you make them," says Tyson. "Just keep repeating to yourself the importance of not over-spending. That way when it comes time to actually pass out those presents you've purchased, you can do it without grimacing as you think about the damage they did to your bank account."

3.
Set a budget and keep tabs on what you are spending. While you're doing your holiday shopping, your new best friends should be your checkbook register, credit card statements, and all of your receipts. It's easy to get into a spending rhythm when shopping for yourself or others, and that's why you need to physically write down every purchase you make and make sure you don't go over your budget.

"When you start to add up everything you're spending, you may be shocked at what all those expenses from this store and that store add up to be," says Tyson. "And don't forget about all those 'necessary' holiday extras. Most people don't budget their shopping and don't realize that by the time you buy all the presents, plus wrapping paper, cards, decorations, etc., it's added up to a ridiculous amount. Having a budget that you know you must stick to will help keep your impulse spending from getting out of hand and will help you hone in on the most reasonably priced holiday items."

4.
Plan what you are going to buy, and don't get any extras! Particularly during the holidays companies pull out their most appealing of packaging in the hopes of snagging the eyes of shoppers. That's why along with your budget, you're going to want to take an exact list of what you want to buy for your gift recipients. Don't go shopping for someone's gift until you know exactly what you are going to buy.

"It's very easy to go in with no plan, see something you like, and get it simply because you have no idea what else to get for a hard-to-buy-for relative despite the gift's significant price tag," says Tyson. "Another temptation that the list will help you squelch is the desire to buy those little knickknacks here and there that you think will make nice small additions to the gifts you've purchase."

READ MORE: Give your family the gift of giving

5. Watch out for deals that seem too good to be true. Retailers run all sorts of specials to induce consumers to buy now, and the holidays offer these companies easy prey in the form of deal-seeking, cash-strapped consumers. For example, furniture stores frequently offer that if you buy now, you don't have to pay a thing for a year, and you might even get free delivery. This sort of "push" marketing can make it harder for you to say no.

"This is just one example of how stores coax in shoppers," says Tyson. "Read the fine print on any deal you are considering taking before you go to the store to make the purchase. It can be even harder to say no once you get to the store, so you'll want to know what you are in for before you get there."

6. Leave the plastic at home. Many of us can explain away spending so much on gifts because we simply charge everything and reason that we can pay it off gradually after the holidays. This is a great way to create a never-ending cycle of consumer debt for yourself. It only creates unnecessary financial stress for you after the holidays.

"Use your budget to figure out how you can purchase the gifts you want to purchase without putting them on your credit card," says Tyson. "If you are so cash-strapped that you think it will be difficult to avoid charging gifts, then you may want to sit down with other friends and family and propose a limit to how much gifts can cost this year - or propose no adult gift exchanges at all."

7. Invest in your grandkids' financial futures. It may not seem as exciting to your grandkids as a new iPod, but a contribution to their financial well-being will be appreciated long after such expensive "toys" are obsolete.

"Contribute to a college tuition fund or savings account rather than buy them more stuff they don't need," suggests Tyson. "Or make one of your gifts a stock fund portfolio that can start accruing now. Also make them aware of the budgets and tools you are using to keep your spending in check. The holidays are a great time for them to truly learn that money doesn't grow on trees."

READ MORE: 11 ways to teach kids smart money habits

8. Give the gift of time to your grandkids. Often grandparents buy gifts for their grandkids with the best of intentions. Either you don't want to deprive them of the toys and gadgets all of their friends have, or you want to give them the things you didn't have as a kid.

"The holiday season offers great opportunities for you to show your grandkids how much you love and care for them," says Tyson. "For example, you can make time with them each week to watch a holiday film or TV show, go on a walk to see your neighbors' holiday lights and decorations, or emphasize that giving back message again and take them caroling at a local retirement home. All of these activities cost next to nothing, and they will be fun for the kids and for you!"

9. Remember that meaningful gifts don't necessarily have a big price tag. "Sure, it might be nice to give your husband a brand new TV, but there are other things out there that will be even more meaningful and enjoyable - like a photo album with candid shots of the grandkids or something they've made for her themselves," says Tyson. "If you are looking to give a gift that truly means something and that will keep its value for years to come, you are better off looking for nonmaterial gifts to give than something your gift recipients could get themselves at the local big box store."

"Money can easily become the focus of the holidays when it should be the last thing you are thinking about," says Tyson. "By keeping your spending under control, you can have a great holiday and avoid the sick feeling in the pit of your stomach that occurs when you start getting those credit card bills in the mail. If you prepare properly, you can achieve a happy balance of spending and saving during the holiday season. That's a great gift in and of itself, for both you and the people you love."