Avoid the Holiday Shopping Hangover

In this season of “buy now, pay later� promotions and budget-busting largess, debt counselors warn that bills rung up today can haunt consumers long after the holiday decorations have been put away.

“Everybody starts the season with the good intention of not overspending,� said Howard Dvorkin, vice president of the Assn. of Independent Consumer Credit Counseling Agencies in Fairfax, Va. “Then they get barraged with marketing, start getting into the holiday spirit and all those good intentions go out the window.�

One of the many causes of holiday overspending is the tendency to “self-gift.� More than three-quarters of consumers buy something for themselves while shopping for others, according to a recent American Express survey.

That, combined with the natural tendency to overspend on gifts for friends and loved ones, often causes consumers to spend far more than they intend to -- and often considerably more than they can afford, debt counselors say.

Indeed, a study by the International Mass Retail Assn. found that the average consumer overspent his or her Christmas budget by 31% last year. Debt counselors note that many of their clients still are paying for Christmases past -- many years past.

“A lot of people are still paying off the holiday bills from two and three years ago,� Dvorkin said. “That sale item isn’t such a great deal when you’re still paying 20% interest on it.�

Here are some tips for keeping holiday shopping under control:

Create a Budget

It’s imperative to create a holiday budget and stick to it, said Richard Quigley, vice president at American Express Co. in New York. Preparing a budget requires nothing more than jotting down a list of the people you must buy a present for, and how much you can afford to spend on each.

Those who entertain or travel over the holidays also must factor in the cost of food, drinks, plane tickets and rental cars. The American Express survey reports that the average consumer will spend $1,073 on gifts this year -- up slightly from last year -- and almost $600 more on entertaining, decorations and travel.

Make a List

And check it twice. Impulse shopping is one of the key reasons consumers fall off the budget wagon, Dvorkin says. A well-planned shopping list can keep consumers focused on what they’ve already decided their spouse, in-law, nephew or whoever wants -- and they can afford.

Pre-Shop

The Internet provides a great way to compare prices without the temptations of the mall, debt counselors say. Bargain-hunting online can save time and money on both gifts and gas.

Manage Expectations

Cash-strapped consumers should consider confession, debt counselors contend.

If cash-strapped consumers let the people on their gift lists know that the largess of yesteryear simply isn’t possible in today’s economic environment, it can take some of the pressure off both the giver and the receiver.

For instance, one San Fernando Valley woman says that the year she confessed to her brother that she couldn’t afford the big gifts they had traditionally exchanged, her brother was elated. It turned out that, with three small children, shopping for adult relatives caused a budget problem for him.

Instead, they came up with innovative ways to exchange useful gifts that don’t carry a price tag: She babysits for her brother’s kids; he handles home improvement projects for her.

Don’t Buy for Yourself

People like to treat themselves at the end of the year, Quigley notes. But there’s no reason to do it at the height of the shopping frenzy. You can get more for less by waiting for the sales that hit in the waning days of the season or the day after Christmas.

Pay Cash

Keep in mind that every dollar charged on a credit card will cost 10% to 25% more in interest charges if not paid off within a few months, notes Chris Viale, general manager of Cambridge Credit in Agawam, Mass. Avoid using credit cards if possible -- unless you intend to pay the entire balance when the bill arrives -- and be particularly careful about department store cards, which frequently carry very high interest rates.

“The best gift you can give yourself this holiday season is a manageable credit card bill in January,� Quigley says.

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Times staff writer Kathy M. Kristof, author of “Investing 101� (Bloomberg Press, 2000), welcomes your comments and suggestions but regrets that she cannot respond individually to letters or phone calls. Write to Personal Finance, Business Section, Los Angeles Times, 202 W. 1st St., Los Angeles, CA 90012, or e-mail kathy.kristof@latimes .com. For past Personal Finance columns visit The Times’ Web site at www.latimes.com/perfin.