Smart Spending During the Holidays – Part 2

In part one of the Smart Spending During the Holiday series, we created our holiday spending budget. Now it is time to figure out what to do with it! Jean Chatzky is such an intelligent woman and a finance guru but many of her tips I've heard over and over during her Money 911 segments of The Today Show. Jean took many questions from her audience after telling us how to create our holiday budgets. Many were about holiday spending while others were general finance, mortgage, and credit questions.

Time for THE TALK - Kids, Teens, and the Budget!

If you are faced with a smaller holiday budget than past years then, Jean encourages you to have THE TALK with your older kids and teens. Talking about the holiday budget in advance will prepare their expectations for the big gift exchange day. With smaller kids, they might not be as aware of the scale back as older kids but no matter how you handle THE TALK, keep it age appropriate and make sure you emphasize your child's needs will be met but their wants may have to wait.

Layaway-good, bad, ugly?

According to Jean, Layaway was originally designed by retailers for consumers to "reserve" an item so the retailer didn't run out when the consumer had the money to purchase the item. I don't think this is how layaway is viewed by the average consumer now. Layaway works well for people who are not disciplined to spend – like me. She calls this forced savings: a trick to get you to save/spend for the holidays without actually putting any cash into a savings account. She prefers putting money into a savings account where it will draw some interest - even if it's a little bit - but whatever trick works best for you is great. So layaway, online or in store, gets an official thumbs up from Jean Chatzky.

Store credit cards with promotional discounts – Are they worth it?

Most store credit cards offer 10% discounts but you can usually find a coupon or online shopping code for at least 10% and many times more just by Googling the store's name plus the words "discount" or "coupon". Store credit cards have higher interest rates than normal credit cards which was the big reason Jean cautions us away from them. There is the occasion when using one is a smart choice. She used the example of when she bought a new living room set a few years ago. She did the research but found the store she was buying from was offering a 20% discount if you used their store credit card, much higher than coupons and other discount codes she had found online. She simply did the math. 20% off a large purchase, say $2,000, is $200 bucks. Since she could pay the creditor within their terms, she made a smart choice. Another thing to consider: applying for an additional credit card will ding your credit score and too much credit is not good either.

Pull your free credit score at quizzle.com and creditkarma.com. You can also pull your free credit report at annualcreditreport.com. Jean suggests pulling a free report every four months – Once from Equifax, four months later Experian, and another one four months later from Transunion. This will keep you well informed about your credit history.

Handling holiday expenses when the monthly living expenses are barely covered.

Jean's covered this in several steps but her philosophy is "You need to know where your money is going to know where you want to go".

1. You have to track every spent dollar down to the penny. Cash, credit, debit, all of it! I suggest you use a spending journal. List the amount, item, and store/location by day. Every time you buy something, whether is a $.50 pack of gum or $30 shirt, write it down in the journal. You can visually see your spending habits after a few weeks, maybe a few days. Perhaps you're stopping by the convenience store for a coffee every time you take your daughter to dance class. The point is, you can correct the behavior once you identify it!
   
2. Reduce your spending as much as possible. Call your cable and telephone providers to ask for a better deal. Consider carpooling to reduce your gas expense. Cut your cell phone plan back.
   
3. Once you have scaled back to the bare bones, the only other option is bringing in more income. Work part time or evenings. At home parties and person to person businesses have traditionally been recession-proof industries.
   

Giving on a budget

Instead of giving a thing, consider giving to a charity in the person's name. The charity will usually issue a special gift card with the recipient's name on it notifying them a donation has been made in their name. The great thing is the charity usually will not disclose the amount of the original donation. This works well for people with a low budget, as a gift for the person who has everything, or even as a great opportunity to teach a child about charity.

Hopefully this helped answer many of your holiday spending questions. The final installment of the Smart Spending During the Holidays series will wrap everything up, give Jean's other money saving tips plus I will give you my personal take on a few of the questions asked.

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.