MONEY MANAGEMENT

HOW TO STAY OUT OF DEBT THIS HOLIDAY SEASON

(December 1, 2006) -- For many people, overspending has become an unwelcome holiday tradition. Holiday debt looms long after gifts have been unwrapped and the toys have been tossed aside. The Virginia Society of CPAs says it’s possible to avoid holiday overspending, but only if you plan ahead. Here are some strategies you should consider.

Set a budget

Take a hard look at your income and expenses and decide how much you can afford to spend without going into debt this holiday season. Then, make a list of everyone you plan to buy gifts for and estimate how much you want to spend on each person. Be sure to include small gifts to teachers, babysitters, doormen and newspaper carriers, as well as the cost of non-gift, holiday-related spending, such as food, decorations, clothing, mailing and shipping packages.

Then add up the figures on your gift list, compare the total to your budgeted amount, and make the necessary adjustments. As you shop, keep track of your purchases so you don’t exceed your limit for each recipient on your list.

Be creative

Use your talents and creativity. Are there people on your list who would like to receive a homemade gift? Use your talent to bake cakes or cookies, knit a scarf or frame a favorite family photograph. Or perhaps you can donate your time by offering to clean your parent’s home, baby-sit for your sister’s children or give guitar lessons to a niece or nephew.

Space it out

You’re more likely to overspend when you’re in a panic to find a suitable gift at the last minute. Rather than doing all of your shopping at the last minute, seek out sales and bargains as far in advance as possible.

If you find yourself overspending, commit to setting up a holiday savings account for next year. Determine how much you can afford to spend and divide the total by 12. That’s how much you need to save each month. To make it foolproof, arrange for automatic transfers from your checking account or your paycheck into your holiday savings account. When you get your check in the fall and start shopping, you can use cash instead of credit.

Increase your holiday income

During the holiday season, there are many opportunities to make extra money. Many retailers hire part-time workers for the holiday season and offer generous discounts to employees.

Paying with cash or credit

As a general rule, you should avoid using credit cards for holiday purchases. Unless you pay off all your credit card bills at the end of the month, those purchases can end up costing you significantly more due to credit card interest.

If — and only if — you are sure you can pay the balance off when the bill arrives, you might consider using a credit card to qualify for discounts, airline miles or extended warranties. For example, many retailers who have their own credit cards offer discounts of 20 percent or more when you use the store’s card to make purchases. You might also consider using a credit card when buying big-ticket items because, in some cases, if you are dissatisfied with a credit card purchase, you have the right to file a dispute.

Avoid delayed payment deals

“No payments due until 2008” deals tend to come with very high interest rates and penalties if you don’t pay by the designated date. Be sure to read the fine print before agreeing to one of these deals.

Consult with a CPA

Holiday spending should be part of your overall financial saving and spending plan. A meeting with a CPA can help you plan for a secure financial future.

The Virginia Society of CPAs is the leading professional association dedicated to enhancing the success of all CPAs and their profession by communicating information and vision, promoting professionalism, and advocating members’ interests. Founded in 1909, the Society has nearly 8,000 members who work in public accounting, industry, government and education. This Money Management column and other financial news articles can be found in the Press Room on the VSCPA Web site at www.vscpa.com.