By Jayne O'Donnell, USA TODAY
Setting a budget, making a list and checking both regularly are keys to savvy holiday spending, personal finance experts say.
"Everyone, regardless of income, always tends to spend a little bit more than they anticipated," says Barbara Stark, director of education and community development at American Debt Counseling in Sunrise, Fla. "People think, 'I'll deal with it later,' but then there's shock and panic when the January bills arrive and the cycle begins again."
Five members of the USA TODAY Shopper Panel are keeping us in the loop as they plan their purchases and buy gifts this holiday season, when many consumers say they're loosening the grip on their purse strings a bit. We're also checking with experts to see how they — and we — could shop smarter. There's still plenty of time to chart a new course (or at least stop shopping) this holiday season.
Four lessons based on the experiences of our shoppers
1Save money all year. LeLynda Briggs, 24, of New Orleans had $25 taken out of each paycheck all year for holiday gifts so she wouldn't wind up in debt for three months after the holidays like she did last season.
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Stark put $10 in an envelope every week and used that as her holiday fund. "If it's out of my wallet, I forget I ever had it," she says.
Dawn Masters, 43, of Denver contributes to a "fun money" fund that will help pay for a Disney trip in the spring but also gets tapped for holiday purchases. She has $125 taken out of her account twice a month.
2Set a budget. Eason Adams, like Briggs, got hit with big bills from his holiday shopping early this year. So he set a budget of about $100 per person this year, even though he has a young son who still believes in Santa Claus.
"I don't really have much of a choice but to go by my budget, as I will not be putting any purchases on credit cards," says Adams, 31, a long-distance truck driver from Inez, Ky.
Marietta Landon, 31, of Douglasville, Ga., doesn't set a strict budget but sticks to about $100 a person for her small family. She says she has "never stressed out about it" or carried a credit card balance over to the next month.
Setting a budget "sounds so 'bah, humbug,' " says Manisha Thakor, co-author of a personal finance book for couples, Get Financially Naked. But it's something everyone should do, she says.
To stay in even closer touch with your budget — or to see if it needs adjusting — she recommends signing up for notifications if your bank balance hits a certain level and checking that balance at least weekly.
People "do not want to look at their financials," says Thakor. "But you need to understand exactly what you have left to work with."
3Keep track of purchases. While it's important to make a list of what you're buying, it's also critical to have a list of everything you've already bought. Tricia Richards, 46, of South Abington Township, Pa., says she's forgotten purchases in the past and fears she's guilty of it again this year.
"Of course, I've lost track of some things I've bought already," says Richards, a self-employed public relations person. "My biggest overbuying surprise has been the stocking stuffers and Advent calendar items. When something costs just a few bucks, it's so easy to rationalize another purchase."
To avoid that problem, Stark — who has two twentysomething sons — puts her holiday gift list on an Excel spreadsheet and carries it around in her wallet. She updates it as she buys things and makes a note of what she's spent.
"I could be done with my shopping, but I feel like I need to buy more," says Stark. "It takes a lot of self-control to stick to your list and stick to your budget."
Thakor says losing track of purchases is one of the most common problems she hears from people she counsels on personal finance through her work with the Women's Financial Literacy Initiative.
4Avoid credit cards if money is tight. Adams cut up his credit cards so he didn't get himself in debt again. Thakor says that's a smart move. She recommends anyone who knows he can't pay off his bill by the due date should use debit cards. She prefers debit cards over cash because it's easier to monitor what you spend.
Richards also steers toward debit cards, especially at the holidays: "I rarely slide a credit card out of my wallet."
According to the American Bankers Association, the average consumer takes six months to a year to pay off holiday debt. And it can take far longer: Stark notes someone who charges $1,220 on a credit card with an 18% interest rate and pays only the minimum payment each month would spend 11 years paying it off. The gifts would wind up costing more than $2,700.
Stark, who is done with her shopping, stayed on budget and didn't put anything on a credit card. "I'm so excited I feel like I have to buy myself a present," she says.
But she won't.
How some businesses are doing
L.L. Bean: Good times could be here again
Christmas may be more than two weeks away, but L.L. Bean CEO Chris McCormick can already say with confidence that the season will be the outdoors clothing and gear retailer's best since 2007.
People are spending more money and buying more items on each store or website visit. Order totals are running 6% higher than last year. "The trend is so clear: People are feeling more confident," McCormick says.
Last Monday turned out to be an even bigger day for sales than Cyber Monday, which set records for the Bean website. "Strong double-digit growth" over the same period last year is putting L.L. Bean well head of its forecast for a 2.3% increase over the 2009 holiday season.
Sporting equipment became an even bigger seller during the recession, McCormick says, and now higher-end products such as kayaks and bicycles are seeing sales boosts. Skis and snowshoes are "really taking off," he says.
Unlike many retailers, L.L. Bean adjusted its inventory for the disastrous 2008 holiday season so it didn't have to resort to deep discounting to move unsold items. Bean remains fairly non-promotional but did launch free shipping in August. The deal runs through the holidays with no minimum purchase requirement. That's seldom done in retailing.
McCormick says customers told the company they were "annoyed with shipping charges," so Bean decided it had little choice. The deal has boosted sales considerably but at so much cost, it's "at best a break-even," he says.
Discounters that have seen big sales increases during recessions have historically done well after recessions because they have an expanded customer base. The reverse can be true, too, McCormick says, and it helps higher-end companies such as L.L. Bean.
"People who have tried trading down in the past have realized you get what you pay for," McCormick says.
UncommonGoods.com: Pricier gifts are selling well
UncommonGoods.com didn't offer any Cyber Monday specials, but did such a brisk business on the Monday after Thanksgiving that it has raised its forecast for a holiday sales increase from "almost 15%" to "up to 20%."
The online and catalog retailer of environmentally friendly, quirky and otherwise creative gifts may have had a bumpy few first years in business after launching in 1999, but things are going smoothly now. The workforce more than doubled to keep up with calls, and packages are actually getting to consumers ahead of schedule.
Customer Brian Stewart e-mailed Uncommon Goods to say that he had "ordered many things from many — ahem — big retail websites on Cyber Monday, and my order from you was on my doorstep" while the other sites were "finally finished processing my orders and sending e-mails."
Along with many other bricks-and-mortar and online retailers, Uncommon Goods is finding pricier items are selling well — such as jewelry and $185 framed dog breed "blueprints."
And while electronics remain a hot seller at other retailers, an anti-electronics product is proving one of Uncommon Goods' top products. In the first two weeks they offered it last month, the company sold hundreds of the $15 "Phone Kerchief," a cloth embedded with silver fibers that will block calls to a mobile phone.
It's a way to show people "that they are more important to you than your device," says Uncommon Goods CEO David Bolotsky.
In October, the company overhauled its website only to see sales plummet. Now that the kinks — compatibility problems with browsers on some customers' computers — have been worked out, it's now running twice as fast as it did a year ago.
There were a few times when the site slowed down on Cyber Monday, but nothing like the problems some far bigger retailers have had in recent years during the post-Thanksgiving rush.
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