Halloween is behind us, the leaves are falling and before you know it, the holiday shopping season will be upon us. In fact, you are already starting to see ads touting holiday deals. It used to be that the holiday shopping season started after Thanksgiving, but that is no longer the case. It seems the holiday shopping season starts earlier and earlier every year. Because the retailers are starting their holiday blitz, it’s important that we begin thinking about our holiday gift giving sooner rather than later.

It is an old story that too many Americans overspend during the holidays. In fact, there are a significant number of people who used their charge card last year to buy gifts and have yet to pay for those purchases. The bottom line: the holiday season should be a time to enjoy our family and friends, not to cause us financial upheaval.

I believe that the great majority of people need to plan for their holiday gift giving so they do not overspend. I can assure you no one who cares about you wants you to have financial difficulty in order to buy them a gift. That is why now is the time to do some planning. As far as I’m concerned, the first step along the way is to decide whom you have to buy gifts for. You should start composing a list of those people so you can properly allocate your resources. Don’t forget those cash gifts you may give to people who have helped you throughout the year. I wish I could tell you whom to give those types of cash gifts to but it certainly depends upon your individual situation. Remember to keep in mind when giving cash gifts to those who have helped you, you are rewarding them for their service and is it not an entitlement.

Once you know whom you’re going to buy and give gifts to, the next thing you need to do is to set a realistic budget. You should know before you begin your holiday gift giving whom you’re going to buy gifts for and how much are you going to spend on that gift. In other words, you must have a budget for all your holiday spending and that budget should be set before you hit the malls or go online to shop.

It is also important to know how you are going to pay for your gift giving. Ideally, nothing should go on your charge card unless you can pay for the purchases before interest starts to accrue. Unfortunately, for many people this is not realistic and they are forced to carry a balance on their charge card. Once again, a little planning can be of great benefit to you. Not all charge cards are the same. If you know you’re going to carry a balance on your charge card and as a result, have to pay interest, it is important to use a charge card with low interest rates. Don’t get caught up in the perks and bonuses that the charge cards offer; rather, if you are going to carry a balance, focus on the interest rate. On the other hand, if you are going to be able to pay off your purchases when the bill comes, then interest isn’t the primary concern; rather, the grace period and the perks become more valuable. Once again, before you begin your holiday shopping you need to make sure you know how you are going to pay or finance the purchases.

I recognize that holiday gift giving is a tradition for many families. However, something I would encourage all families to do is to set some limits for holiday purchases. Whether it’s limiting whom you give gifts to or setting a maximum price on a gift. Doing these things can reduce a family member’s stress during the holiday season and that is something we should all strive for. As I said earlier, the holidays should be a time to enjoy our family and friends, not to put someone in the poor house.

Good luck!
Rick is a fee-only financial advisor. His website is www.bloomassetmanagement.com. If you would like Rick to respond to your questions, please email Rick at -.