About now, we are getting those dreaded bills we so blithely ran up during the holidays. According to the National Retail Federation (NRF), Americans were expected to spend 2.8 percent more this year than last year. And in 2010, we spent $452.9 billion on holiday shopping.
That’s a big number!
Not surprisingly, much of our spending is done with plastic. Between credit, debit and store cards, shoppers will sign for hundreds of billions in goods and services for the holidays. The largest portion of that will be on credit cards.
The results? A lot of people are facing nasty credit card bills in January. The NRF expects the average holiday credit bill for American families will be $704. Depending on how big the balance on the card is, it may take until summer to pay if off.
What's a consumer to do?
Just as the smart shopper compares prices when she shops, the smart credit card user pays off the resulting bills as quickly as possible. The reason is simple. If your interest rate is 18 percent (admittedly on the high side, but not uncommon) the cost of that sweater for Aunt Polly goes up by 1.5 percent per month. So much for the big sale.
You may be among those fortunate enough to find one or two things that you can do to pay off your holiday bills completely. There are a few places where you might find hundreds of dollars of savings.
Most of us will need to chip away at the credit card balance a little at a time. And some solutions will require a little sacrifice, which is never popular.
One place to look for savings is to review your auto and/or homeowners' insurance. It's possible that you have the wrong coverage, or by comparison shopping you can cut a premium significantly. Talk to your agent about your coverage and check with an independent insurance agent or website that compares rates to make sure you are getting the best possible.
Another place to look for savings is to examine those services you pay for by subscription or that are automatically charged every month. You might decide to adjust the premium services from your cable company or to drop out of the DVD rental club for a few months. Each move might only represent $10 or $15, but you only need to take action once to save money each and every month thereafter.
Track Your Food Budget
The biggest target for saving is in the food and grocery area. We spend about 20 percent of our money on food. We make decisions about buying food all the time, and so whether we change our habits during the weekly shopping trip or daily at the company’s cafeteria, small changes add up quickly.
For instance, bringing your lunch to work instead of buying it, could save about $30 a week. Convincing your kids to take lunch to school even a few days a week will represent more savings. Curtailing trips to the vending machine for soda or coffee can make a difference, too.
When you shop for groceries, keep a price book in which you note the lowest price you have recently paid for regularly purchased items. This will help you readily identify real sales and give you the opportunity to stock up on anything when the price is right. This system can save you up to 10 percent over several months.
Restaurants are an expensive place to buy your groceries and for most simple meals, you can buy the ingredients for about a third of the restaurant price. Of course, we eat out so often to save time, but consider other ways to save time. For example, if you make twice the amount for a home meal and freeze half, you not only save time, but you save money.
The Whole Family Benefits
There’s another benefit to doing this. Your family will profit from meals prepared at home and shared at the table. They are much more satisfying than munching French fries out of the bag in the car or at the kitchen counter.
For most families, a combination of the above tactics will help them conquer the holiday bills. It will also take some determination. The easiest thing to do is to pay the monthly credit card minimum, but that's the best way to pay the most for the holidays. And who wants to go from Santa last year to Scrooge at the end of this year?
Gary Foreman is a former financial planner and purchasing manager who currently edits The Dollar Stretcher.com website. You'll find hundreds of articles to help you stretch your day and your dollar.