Smart Spending During the Holidays - Part 1

Earlier today I had the pleasure of joining other ladies from the blogosphere in a chat with Jean Chatzky about responsible spending during this holiday season. The hour literally flew by and I felt as if we had just hit the tip of the iceberg when the audio conference was over but at the same time we covered so much information. I've looked over my notes a million times today. To make it easier for everyone to digest, I'll break this down into a three part series. Today we will go over how to establish your holiday budget along with the retailer's holiday tactics to get you to open your wallets in their stores!

The conference started with a few tips Jean wanted to share with the group.

1. Determine your holiday budget (Jean suggests 1.5% of your take home pay is an appropriate number)
   
   1. Make a list of all the people you plan to buy gifts for and include a monetary budget for each person. During the course of your holiday shopping, if you need to borrow from Aunt Peggy's budget to cover Uncle Henry's gift, that it is perfectly fine. So long as your bottom line remains the same.
      
   2. Include entertaining expenses and expenses for wrapping paper, cards, postage, family holiday pictures, EVERYTHING you do to prepare for the holidays.
      
   3. Once you listed everything in your budget, cut it down. Just as construction budgets go over, so do holiday budgets. Cutting back the original budget will help keep you within your overall budget including any unexpected overages.
      
2. Determine your cash reserve-Know what cash you have available to spend on the holidays
   
3. Use unused gift cards to supplement your holiday shopping. Jean specifically mentioned stockpiling gift cards she and her kids acquire throughout the year to help offset the cost of the holidays. Most kids don't even notice or remember their gift cards OR you probably have many with partial balances. This is a clever way to handle part of the holiday expenses.

13 million people in the US are STILL in debt from 2008 holiday season (according to consumer reports). These steps can help keep you from being among this number next year!

Jean went a bit off topic at this point stating Roth IRA's will be FREE all year long in 2010. For the entire year, you can convert your Traditional IRA to a Roth for nothing! 2010 sounds like an excellent year to begin saving for retirement.

The conference soon shifted to the Q&A portion of the call.

One of the first questions was in regard to retailer's holiday tactics. Turns out there are two sets of tactics at work.

• Luxury retailers (like Neiman Marcus and SAKS Fifth Avenue) have bought less inventory to drive up the demand. This has created an atmosphere get it before it is gone forever. The New York Times ran a very interesting story on it today. You can read it here.
  
• Big box retailers (like Walmart, Kmart, and Target) are in the middle of Black Friday Wars. Their strategy hinges on deep DEEP discounts drawing you in. Black Friday circulars are being distributed early in the hopes of courting you to their store. The War has gone even further by extending many of the deep discounts into the weekend. This is meant to encourage consumers to shop all weekend also capturing the business of those who avoided the Black Friday traffic. While selling board games for pennies on the dollar, one might wonder how they can afford such deep cuts. These guys are also betting you'll buy other things you need like toilet paper, laundry detergent, socks, cards, etc.
  

Will it work? Perhaps. Trends show increased spending, even with unemployment near 10%. Jean suggested this is a reaction to the pop of the stock market giving consumers a confidence boost in the economy. One thing is for certain, we will know soon enough!

Jean Chatzky has some great tools on her site including a holiday spending calculator and the Oprah Show feature, Debt Diet Online.

Disclaimer: These are suggestions and tips I gathered from an audio conference with Jean Chatzky. Not financial advice. The information in this article does not constitute legal or financial advice. You are encouraged to contact an attorney or financial advisor if you have any questions regarding any of the information on this site.