How To Have a Debt-Free Holiday

You can have a season to remember without incurring debts you can't forget

by Bambi Holzer

If you're like most Americans, you may be spending less on gifts this year than you have in years past.  In this economy (or in any other, for that matter), saying no to needless consumer debt just makes good sense. 

Below are some ideas to ensure that your holidays will be merry and debt-free.

Smart Steps to Stay Solvent

In a volatile economy, setting a smaller budget for the holidays, even if your portfolio is on the rebound, is one step that should help you survive the season debt-free. Your budget should include more than gift purchases; it should also cover anticipated travel costs, expenses for family dinners, and the like. But it's the gifts that can really set you back, so here are some of my favorite ideas for meaningful, budget-friendly gifts for grandkids:

• Charitable donations. I'm a fan of Charity Checks, not necessarily for children, but for other relatives on your list. A Charity Check gives you the tax benefit of making a charitable contribution, but works like a gift certificate — you buy a check in a specified amount ($25 or more) and your recipient can choose which charity receives the actual donation.

• 529 plan contributions. It's not an exciting present to unwrap, but your adult kids, and your older grandchildren, will appreciate any contribution you can make to a college savings account.

• Magazine subscriptions. It's a great way to give your kids and grandkids a "gift" each month. Yearly subscriptions to most magazines are surprisingly inexpensive.

• Family history videos or DVDs. If they aren't asking already, your grandkids will soon want to know more about their family history. Create a "living legacy" by asking a friend of neighbor to videotape you talking about anything from your family roots to how your own grandparents met and married.

Do you expect to spend less on gifts this season than you did last year? Yes, our finances are not as strong 35.9% Yes, we're doing okay but trying to cut back wherever we can 40.5% No, we're doing okay and want to spread holiday cheer 15.3% No, we're struggling but won't shortchange the kids 8.4% Do you expect to spend less on gifts this season than you did last year? Yes, our finances are not as strong Yes, we're doing okay but trying to cut back wherever we can No, we're doing okay and want to spread holiday cheer No, we're struggling but won't shortchange the kids

Start Early and Save

One way to avoid holiday-related credit-card debt, is to set aside money early. Many credit unions — and stores like Sears and Kmart — let you sock money away before the holidays. Saving for holiday spending doesn't even have to be that formal; you can direct funds into an existing savings account, or set up a new account and use the money you put there  for holiday expenses exclusively. Make starting such an account, or contributing to one, a 2011 New Year's resolution.

I also recommend that you start shopping early. Sure, stores often have last-minute holiday sales and specials, but last-minute purchasing can lead to impulse buys that bust your budget. If you wait until the day before Christmas, you might be stuck paying more for a gift simply because you've run out of time to comparison shop for the best price. And last-minute online purchases often carry costly expedited-shipping charges.

These tips can help keep you out of the red this season, regardless of how much you plan to spend. But if, like so many other people, you're committed to spending less on gifts this year, don't worry that your grandkids may have fewer big packages to open. Focus on the positive: A lighter budget presents the perfect opportunity to celebrate the true meaning of the holidays, instead of treating the season as one big shopping spree.