Frugal Family Challenge: Holiday Gifts

Dec. 11, 2008— -- Everyone loves the holidays. It's a time for family, big holiday meals, and giving and receiving gifts. But it also means spending a lot of money.

More and more Americans feel the effects of the recession. With the holiday season upon us, 51 percent say they will pay less for presents, according to a recent ABC News poll.

In this month's Frugal Family Challenge, USA Today and ABC's "Good Morning America" have asked a family to spend less on its holiday gifts.

With help from money coach and "Overcoming Overspending" author Olivia Mellan and ABC's technology contributor Becky Worley, the Zacek family will test its new spending limits.

The family will try to apply Mellan and Worley's advice and document its members' shopping trips.

Following is a sneak peek at the Zacek's holiday challenge. Tune in on Saturday when "Good Morning America" reveals how they did.

Meet the Zaceks

The Zaceks are tech fanatics. Living in the rural area of Concord, N.C., a lot of the family activities depend on tech tools.

Sue and Eldon covet all the newest electronics, and their two teens, Trey and Valerie, up the ante. Their idea of bonding is playing the family Wii.

"[They want] what's out there now," Sue said.

With the holidays just around the corner, the family wish list is loaded with techy toys. It includes iPods, gaming accessories, digital watches, mp3 players, music players and video camera accessories.

However, recent turmoil at work has prompted the Zaceks to take a hard look at their shopping list.

Sue works in banking, and Eldon is a consultant in the auto racing industry. Both sectors of the economy are hurting, and the family's uncertain financial future has prompted a collective belt tightening.

"We have to trim back," Eldon said. "We are definitely open for suggestions. I know there is probably at lot of places here we could be doing better managing of our finances."

The idea is to sit down and help the family come up with a reasonable budget for holiday gifts, and then to teach them how to find them at a discount.

Meet Olivia Mellan

To help with their task, "GMA" set up the Zaceks with financial planner Mellan from the Web site moneyharmony.com.

First on the list is setting a family budget. Originally, the Zaceks had planned to spend between $1,200 to $1,500 on gifts. But Mellan said if the family's goal was to tighten its belts, that number was way too high. It would be much more reasonable to visualize a total spending limit per person and make a verbal pact to keep it.

Mellan also had some general advice for prepping the kids for the upcoming dip in spending.

"Sit down with your kids at a time when no one is stressed and talk to them about [how it's] necessary to spend less during the holidays this year," she said. "Ask them for a list of things they'd want, and tell them in advance that they'll be getting some of the things on the list -- not all of them."

With her help, Sue and Eldon also turned the situation into a teachable family moment. Mellan told the parents to help their kids start budgeting and learning to deny themselves in a healthy way.

"Setting limits for our kids is the best life lesson we could ever give them," she said.

Meet Becky Worley

With the cost limit in mind, "GMA" technology contributor Worley completed the family's financial makeover.

She gave family members a few important tips for their holiday shopping -- buying refurbished goods, making gifts themselves, and searching for coupon codes in all the stores where they already shop.

All of those options will slash costs without sacrificing the quality of the items. And the Zaceks won't even need to step outside their door, because many of Worley's secrets involved using the Internet to find great deals.

"If you want to get serious about finding deals, you need to start online, and there are some specific tactics we can use to get you some fantastic bargains," she said.

She directed the Zaceks to Internet destinations, such as download.com, where many programs are freely downloadable for use in a few keystrokes; woot.com, a site that only sells one item at a big discount each day; and typobuddy.com, a service that finds misspelled auction listings on sites like eBay and Craigslist.