Avoid Going Into Debt This Holiday Season

Nov. 28, 2000 -- While retailer and others rejoice at the arrival of America’s most lavish holiday season, many consumers equate Christmas with debt.

The best of intentions of many Americans, it seems, are no match for marketers fully aware that fortunes, not to mention careers, are made or lost in a five-week period that begins the day after Thanksgiving.

An annual shopping survey conducted by the International MassRetail Association, a trade group of retail companies and theirsuppliers, found Americans last year said they would spend anaverage of $849 on holiday gifts. They actually spent 20 percentmore, or $1,067.

This year, consumers surveyed by the Arlington, Va., trade grouphave set a goal of $828, down slightly from 1999. But “we believethat they will actually spend more, as they did last year,” a spokesman for the group says.

‘You’re Over Budget’

Why will so many shoppers spend more than they planned? “It’s effective marketing,” says Ronald W. Rogé, a financial adviser in Bohemia, N.Y.

“You go into the store with a list and they have all these impulse items out front. You [buy those] a couple of times and you’re over budget,” says Rogé, who recommends shopping online to counteract the in-store deals that are just too good to ignore.

But as personal debt levels rise, some consumers groups believe Americans just might rein in their spending this holiday season.

“The intention [this year] is to spend less, especially using credit cards,” says Mark Wolff, a senior vice president with the Credit Union National Association in Washington, D.C. Wolff bases his assertion on a survey released Monday and conducted on behalf his group and the Consumer Federation of America. The survey found one-third of Americans who plan to use credit cards for some of their holiday purchases are worried about being able to pay off their balances.

“There are a combination of concerns affecting consumer confidence,” Wolff says, citing higher energy prices, a volatile stock market and slower economic growth.

Make a List, Check It Twice

One factor behind the yuletide of rising debt is that most people are completely passive when it comes to managing money — until debt problems overwhelm them, says Steve Rhode, president of Myvesta.org, a credit counseling service in Rockville, Md., and co-author of Get Out of Debt.

Rhode suggests you make out a budget and write the total, say$1,000, in the back of your check register. “As you purchase — whether by cash, check or credit — subtract it from the balance,” he says.

Not only will this help you avoid overspending, it will give you a head start on planning for Christmas 2001.

“In January you’ll know how much you spent at Christmas,” Rhode says. “Divide by 12 and save that much every month and you’ll have enough for next year without having to fall back on credit cards.”

A Different Approach

Cyndi Bailey of Englewood, Colo., knows how easily Christmas spendingcan get out of hand. There was a time when her idea of Christmas presents included a$550 watch for her mother and a $1,500 lawn mower for herfather-in-law.

Bailey, a 26-year-old computer software engineer, said she andher husband were busy charging their way deeper and deeper intodebt that had begun building during her college years and becameoverwhelming by the fall of 1998. “We were getting 10 to 15 phone calls a week” from creditors,Bailey says. A nonprofit counseling service helped them consolidatetheir debt — which had grown to more than $60,000 — and work out apayment schedule with creditors. Now they take a different approach to holiday shopping.

She starts by making up her holiday shopping list in June.

“I go to outlet stores where they have discount stuff. I find a lot of things I know my friends will like — andthey can be 70 percent off,” Bailey says She also buys on layaway, paying for the purchase over several months. And this year she’ll be making some gifts featuring photos of her 6-month-old son Donovan.

“I love Christmas, and we do try to be generous,” Bailey says. “But instead of buying outrageously priced things, I try to findthings people will like and use on a daily basis — and that we canafford.”

The Associated Press contributed to this report.