Two articles: Fight the urge to splurge/Deals on Holiday Gifts Could Lead to Overspending
Tips list: Fighting the urge to splurge
Susan Tompor/Detroit Free Press
15 December 2011
• Take a hard look at how much you already owe in credit card debt. It's not going away any sooner if you charge a ton more to take advantage of deals.
• Go over your receipts. Go online or get information on the phone about credit card charges that you've made so far or what you've already spent with a debit card. If you've spent a lot by mid-December, it could motivate you to pull back during the final days of the holiday season.
• Don't be misled into thinking small credit card payments will be easy. GreenPath Debt Solutions, a not-for-profit credit counseling agency, warns of this alarming Black Friday statistic: The average holiday shopper spent just short of $400 during Thanksgiving weekend this year, up 9% from 2010.
• Don't use too many credit cards because it makes it hard to keep track of total spending.
• Remember if you put something on layaway. Pay attention to those rules and terms so you don't lose money.
• Don't pick up last-minute gifts. You'd buy something no one needs and may be tempted to splurge and buy something for yourself.
• Don't second-guess the gifts you've already bought. You don't need to add second or third gifts.
• Do not try to give your children everything. Leslie Greenman, a St. Louis-based financial planner and author, said kids don't need everything they want, and they certainly don't need a better cell phone than their parents carry.
• Pay attention to the extra and sometimes hidden costs of the holidays -- new towels or rugs if you're having guests, extra food to entertain, trips to the movies or special holiday shows.
• Ask yourself whether you really need to spend that next $10. Remember that you generally spend more in November and December, so try to cut back in some areas to make up for bigger purchases.
• Make a few more meals at home, keep holiday lights off a few nights and watch movies at home to save a few dollars.
Deals on holiday gifts could trigger overspending
Susan Tompor/Detroit Free Press
15 December 2011
Walking through the mall one evening, I passed a high-end accessory shop where a scarf can cost $125 and spotted a sign that read "Splurge and Save."
If you spent more than $200, perhaps on two scarves, I guess you got a 25% discount or some such.
Excuse me, but didn't that "Splurge and Save" strategy get us in trouble in the first place?
Oh, don't get me wrong. I've done my share of splurging. Just look at my feet.
Some days, I'm wearing leopard print shoes, bought on sale but not exactly a necessity. I've also been known to buy yet another, even better Christmas gift for someone after I've finished shopping just because I ran across a sale too good to pass up.
Holiday sales and deals make it enticing to stand in line or even wait outside in the cold for the store doors to open. And I know I'm far from alone when it comes to feeling good about snagging a bargain.
Should we return to a splurge--and-save game plan? Remember the old rule for making money: You've got to spend more to save more.
But Ken Lin, CEO of Creditkarma.com, warns that all the spending will catch up with you in January. According to Creditkarma.com, the average consumer with a credit card has $6,600 worth of debt on it.
Obviously, this is one case in which you'd want to be far below average.
About 6% of consumers -- or 14 million shoppers -- still haven't paid off last year's holiday credit card bills.
Splurge and save? Really? Two-and-a-half years after the official end of the worst recession many of us have ever seen?
Clever marketing. But I have a hunch that this holiday season, in many cases it could be working.
Resist seduction of the sale when holiday shopping
LaKeisha Ross, 18, knows she got that urge to splurge this holiday.
She walked into one store to buy a digital camera for a gift and walked out instead with a flat-screen TV. She's proud that she picked up the TV for $200 but spent about $80 more than she had planned.
"It's hard to just pass up the sales," said Ross, a student at Wayne State University.
And that's why we've seen all those sales, including two-day-only deals at Toys R Us, three-day "almost last-minute" sales at Target, 50%-off signs on men's sweaters at Saks Fifth Avenue, promotions at Henri Bendel and nonstop e-mails about sales from J. Crew, Talbots and others.
The holiday spending mood is back in the air -- with the well-to-do being better able to do some splurging. Mark Zandi, chief economist at Moody's Analytics, said his sense is that higher-end consumers are splurging, at least temporarily, after putting off purchases during the long recession and weak economic recovery.
"There appears to be a fair amount of pent-up demand that this group is unleashing," he said.
Diane Swonk, chief economist for Mesirow Financial, noted that the rebound in the auto industry is the primary reason for the better outlook here, especially at higher-income households.
"Executives in the auto industry are finally doing better," she said, "while Wall Street bonuses were cut 20%-30% from a year ago."
"High-income households are doing reasonably well," Zandi said. "They have a job, very little debt, save for perhaps a fixed mortgage."
And, he said, despite market volatility,many stock portfolios are holding their own.
Many people have slogged through the past two or three holiday seasons by cutting back. Even some well-to-do consumers who didn't have to cut back because they thought it was tasteless to be showy.
Those days are gone. Did you see how many stores are stocking outrageous feathery vests that look like something out of Kim Kardashian's closet?
But can you splurge too much?
"We almost have to protect ourselves from ourselves," said Leslie Greenman, a St. Louis-based financial planner and author.
Cash is still king
She said shoppers can overspend out of a sense of panic, such as when they feel pressed for time. Shoppers can overspend when they're feeling down about a loss. And holiday shoppers can buy one too many gifts for themselves, Greenman said.
Her No. 1 suggestion: Bring cash. Shoppers could cut the holiday budget by 12% to 18% if they don't use credit cards, she said.
Greenman said gift-givers absolutely must stop thinking of spending money as a way to show love, too.
"If love and money were the same thing, Kim Kardashian and Kris Humphries would still be together," Greenman said. "Look at the size of her rock."
But many shoppers are too busy looking at the size of the markdowns and searching for a coupon to get another $15 off that 50%-off deal.
Some consumers on the lower end of the financial spectrum told me the huge markdowns are driving them to buy now instead of waiting until 2012 when they fear prices could be higher.
Ross, who has a job at the Finish Line in Oakland Mall, said she has seen customers come in the store to buy shoes and then walk out with the shoes and two college sweatshirts priced on sale at two for $40, instead of the $50 each.
It's the draw of the deal.
Less worry in the air
Some middle-income consumers who have modest new-found wealth -- say an auto bonus, a raise or a settlement in a lawsuit -- are not cutting back this season. Some are even spending more money.
Sandra Baudin of Hazel Park said she wants to give her family more gifts this year, and she might put off paying some bills to do so.
She has a little bit more money than last year thanks to a lawsuit settlement so she might spend $1,000 on gifts, up significantly from $300 last year.
Zandi said the key to stronger spending by lower- and middle-income households is more jobs.
"I don't think these groups will be able to spend with more gusto until job growth picks up," Zandi said.
Too many consumers, obviously, must continue to go without a holiday shopping spree.
But others are less worried about layoffs, as the jobless rate drops. Some are able to take advantage of the sales.
According to a Gallup survey, the average American will spend $712 on holiday gifts this year. About 54% say they'll spend the same as last year.
In October 2007, the Gallup survey said the average American expected to spend $909.
It's highly doubtful that people will splurge like they did before the deep recession. But the continued discounting and sales could drive some to spend a bit more than planned.
That "Splurge and Save" strategy could very well be coming back in fashion.
Contact Susan Tompor: 313-222-8876 or