Starting Out


10 Holiday Money Mistakes

Erin Burt

You and your wallet will be jollier if you avoid these financial pitfalls.



Editor's note: This story was updated in December 2009.

With the promise of a new year and a set of fresh resolutions just around the corner, we often let loose for the holidays -- sipping an extra drink at the office holiday party or packing on a few more pounds under a winter wardrobe. But don’t let holiday cheer make you lose control of your spending, too. Avoid these ten missteps to stretch your budget through the holiday season:

Sentiments like this have prompted retailers to try even harder to lure shoppers in the door. Deals are everywhere. But even with such an abundance of bargains -- or perhaps because of them -- it's easy to go overboard or make other spending mistakes. Avoid these ten missteps to stretch your holiday dollar the farthest this year:

1. Being blinded by bargains. Desperate retailers ushered in the holiday season early this year with premature Black Friday–esque sales, pushing you straight from your Halloween costume into your Santa suit. But don’t let the abundance of bargains trick you into buying something simply because it's on sale.

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Stay focused by sticking to a shopping list. Before you head to the store, write down everyone you need to buy for, how much you're willing to spend and gift ideas for each person. An hour of forethought can save you a bundle in the long run.

2. Forgetting to budget for the extras.With gifts themselves accounting for only 64% of this year’s expected $128 billion in consumer holiday spending, we’ll drop a whopping $46 billion on all the other little things, according to industry research firm IBISWorld. Remember to factor in the costs of greeting cards, postage, family photos, shipping, décor, entertaining, travel and even higher utility bills for your festive outdoor light display.

3. Buying on credit. If you have to put the purchase on your credit card or sign up for the store's financing, you simply cannot afford it. Any good deal you thought you were getting will be eroded by the interest you'll accrue and the time you'll spend as a hostage of debt. About 13.5 million Americans are still paying off last year’s holiday bills, according to Consumer Reports.

4. Not keeping the receipt. Don't you hate it when you find someone’s perfect gift deeply discounted… after you already bought it at a higher price? If you hang on to your receipt, you can save yourself the regret and the extra cost: Many retailers will honor the lower price and refund you the difference. Some stores, including Best Buy, Wal-Mart and Target, will even match a competitor’s cheaper price.

Keep all your receipts together in a file folder or envelope, adding new ones as soon as you get home with your latest gift find. For online purchases, try creating a folder in your in-box, especially for your electronic receipts and shipping confirmations. A few weeks after the New Year’s ball drops, you can delete, or shred and toss, any receipts you didn’t end up needing for a refund or return. And in case a loved one needs to make a return, don’t forget to include any gift receipts with your packages. Without the receipt, some retailers will give only store credit for a return, or they could refuse the return altogether.

5. Spending to impress. This is a biggie, especially for young adults who may feel compelled to prove their success and their new independence. Don't let your gift giving become a larger statement than the gift. Before tossing something in your cart, ask yourself whether the recipient would really use it and whether you can really afford it. And the same goes for entertaining. It's the company of friends that matters, not how much money you spend. (Check out our ten creative party ideas for a tight budget.)

6. Over-giving. It's wonderful to get caught up in the spirit of giving, but not if that means you'll break your budget or go insane trying to pull it off. You don't have to buy something for every single person you know (your co-workers, neighbors, newspaper deliverer, that guy you make small talk with at the bus stop). Stick to the people who count most in your life, such as family and close friends. You might even suggest drawing names among groups of co-workers or relatives to whittle your gift list further. Chances are others are feeling the strain, too, and will welcome the idea.

But if your office doesn’t play Secret Santa or Yankee Swap, follow the general rule of giving down, not up. According to the Emily Post Institute, gifts for bosses should come from a group of employees or not at all. Managers, on the other hand, may personally give gifts to his or her staff, as long as the gifts of choice don’t get too personal.

7. Giving in to gift guilt. Don't let guilt drive you to break your budget or go into debt. You don't have to spend the same amount of money on every kid on your list, for example. Giving thoughtful, age-appropriate gifts is much better. You are also not obligated to give a gift that has the same monetary value as a gift someone gave you, says etiquette expert Peter Post, or even to reciprocate unexpected gifts. Simply accept the gift and say thank you. (Test your gift-giving etiquette.)

8. Failing to do your homework. That discount looks like a good deal, but do you know whether it's the best value for your money? (Remember, inexpensive sometimes just means cheap.) Hit the Web before making major purchases to compare prices, read customer reviews and make sure you're getting a quality item at a good price. (See Amazing Holiday Deals Online for the best Web sites to do your research.)

Check the Web for coupons, too. Many retailers offer coupons you can print and take to the store, or you may find e-coupons that save you money on online purchases or shipping costs.

9. Procrastinating. In the frenzy of last-minute shopping, you’ll have no time to give thoughtful presents and might compensate by spending more. To avoid that panic-induced splurge, get your gift list in order early (like, yesterday) and give yourself time to shop smart.

If you're shipping packages, aim to make your purchases at least a week before you need them to arrive so you won’t have to pay extra for expedited shipping. Christmas gifts, for example, should be in the mail by December 18; gifts for the first night of Hanukkah this year should be sent by December 3.

10. Fruitcake. And for heaven’s sake, don't waste your money on a bad gift. You may as well toss your money on a blazing yule log. Here are some common gifting gaffes to avoid:

  • Gadgets they'll never use (golf-ball-finder glasses, battery-powered potato peeler)

  • Desk clutter ("gone fishin'" plaques, Zen gardens, paper weights)

  • Overly personal (lingerie, nose-hair trimmers, weight-loss books)

  • Thoughtless (cookies for the diabetic, wine for the recovering alcoholic, or giving someone the same gift two years in a row)

  • Tacky (holiday apparel, stuffed animals for anyone over age 10)

  • Cliché (snow globes, coffee mugs, Chia Pets and, yes, fruitcakes)



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