Thanksgiving is Thursday, so we can't deny it any longer. The holidays are officially here, as if the snow wasn't a big enough hint.
We each have our own meaning for this season. It's easy to understand what it means to retailers. They have been telling us since before the election was over. It's also easy to get caught up in the holiday hype of spend, spend, spend. Sometimes, it seems as if the shopping frenzy is a competition to see who can give the most or who can secure the best discounts.
Here are some tips for enjoying the holidays as they were intended and entering the New Year in good financial health.
Set a budget: It's familiar financial advice, but it's timeless for a reason: It works. I'm not suggesting that you put a damper on your holiday spending. But set realistic limits for gift-buying, decoration purchases, meal planning and gifts for yourself - then stick to your plan. When you have a plan, you're much more likely to control purchases, avoid impulse buys and respect reasonable limits. When the holidays are over, you'll be thankful you set a budget and stuck to it.
Avoid the credit card: Use your debit card, checks or cash for purchases and do everything you can to avoid the credit card. That way, you'll avoid paying what could be double-digit interest charges on your purchases, especially smaller purchases. Believe me, those stocking-stuffer socks will look a lot less jolly when you realize you're paying 18 percent interest on them.
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Pay off credit card balances: If you don't stick to the cash method entirely, remember to pay off the borrowed money balances as soon as you can after purchase. You want to have those credit card purchases paid before the Fourth of July! Make this part of your budget plan. Don't let the debt hangover get control of your New Year's resolution
Consider tapping home equity: For larger holiday purchases, such as a snowmobile, ATV or even a new car, finance directly. Shop for the best interest rate as hard as you shop for the best deal on the item. Consider using a home-equity loan instead of putting the item on a credit card. Interest rates for home-equity loans are by far a much lower than rates offered by most credit cards, so financing costs less. You also may reap some tax benefits using your home equity.
Make an extra payment: One of the best gifts you can give yourself is to make an extra payment on your outstanding loans. Be sure to earmark any extra payment amount to reduce the principal balance on your loan. Making what sometimes is called a "13th monthly payment" to reduce the principal can help you more quickly pay off your loan and reduce your overall expense.
Be careful: Be extra vigilant against credit card fraud and identity theft during the busy holiday season, when all of us tend to be distracted. Watch your bank account and credit card statements to make sure unwanted purchases don't appear. Double-check store receipts to see that you received the items you purchased at the correct prices. And be careful to protect your PIN when withdrawing funds from ATMs or at the checkout terminal. Remember, signature-based transactions are always the safest.
Segregate online purchases: Online purchases present a higher level of risk to your data. At a time when more of us are buying online, it makes sense to set aside one credit card exclusively for online purchases. This way you can keep a better eye on what you're buying and make sure that nothing on your statements was purchased by anyone else. Having one card for online buying also helps you easily organize your purchases, and you can cancel the card quickly if you suspect something is amiss.
As we enter the holiday season, our wish for you is health and peace - physical, emotional and financial. Following these simple tips are some of the best ways to enjoy the peace of this special time while staying in shape financially.
Dale Lewis is president and CEO of Park State Bank in Duluth. You can reach her at president@parkstatebank.com or (218) 722-3500.
