The holidays can put a big dent in anyone's bank account. In fact, consumers are expected to spend nearly $750, on average, this year on gifts, décor, greeting cards, food, candy and more, according the National Retail Federation. That's not small change.
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Sure, it's the season of giving, and you might feel compelled to spend more than you do during the rest of the year to spread holiday joy. But if you're not careful, you'll end up wasting money if you use the holidays as an excuse to abandon good financial habits. Here are 13 holiday money wasters to avoid:
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1. Not setting a budget. Before the holiday season starts, take some time to write down all the extra things you'll be paying for -- such as the restaurant meals you'll eat while out shopping, ingredients for holiday goodies that you'll make for friends and family, postage for holiday cards, cab rides home for late-night parties, and the list goes on. Set a spending limit and keep tabs so that you don't exceed it and end up without enough cash in your account to pay bills. One way to stick to a holiday budget is to put cash in envelopes designated for certain expenses. You'll know you've reached your spending limit when the cash from the envelope is gone.
2. Shopping without a list. Don't go into a store without knowing what you're going to buy for friends and family this holiday season. Otherwise, you could get caught up in the excitement of the bustling stores, submit to high-pressure sales tactics or the frenzy of last-minute shopping and overspend. If you exceed your gift-giving budget, you'll have to cut back in other areas or rack up credit-card debt.
3. Shopping at the wrong times. Black Friday is synonymous with deals but not everything goes on sale the day after Thanksgiving. For example, you'll find the best prices on toys and name-brand TVs in December. You'll find more apparel deals at online retailers on Cyber Monday (the Monday after Thanksgiving), according to dealnews.com, which tracks deals. See Best and Worst Buys of November and 12 Things Not to Buy During the Holidays to learn more about timing your purchases to get the best prices.
4. Not comparing prices. Make sure you don't spend more than you have to on gifts by comparing prices before you make any purchases. Shopping online makes it easy to find the lowest prices for the items on your gift list. See 10 Best Ways to Find Holiday Deals Online for tips. And if you're in a store, use smart phone apps, such as RedLaser, to scan barcodes to compare's the store's price with other retailers' offerings. Then ask if the store can match the best price you find online. See How to Score the Best Black Friday Deals for more strategies.
5. Racking up a credit-card balance. You might think you're saving money by buying all your gifts and holiday items on sale. But if you charge everything to a credit card and don't pay off the balance, those savings can easily be erased by the interest you'll be paying on that balance. Use this calculator to find out what the real cost of carrying a credit-card balance is.
6. Using layaway. Layaway allows customers to select items they want and pay for them over a period of time. Once final payments are made, items may be picked up. This method of payment can be a good option for consumers who would otherwise use a credit card for purchases and not pay off the balance quickly (thus accruing interest). However, there are several reasons layaway can be a money waster, such as the fees you'll have to pay. See 5 Reasons Layaway Plans May Cost You More.
7. Paying too much for shipping. If you plan to do your shopping online, you often can avoid paying for shipping by having your purchases shipped to a retailer's brick-and-mortar store or by taking advantage of free shipping promotions. You can find free shipping codes at FreeShipping.org, or you can take advantage of Free Shipping Day on December 17, when more than 1,000 merchants will offer free shipping with guaranteed delivery by Christmas Eve. See 6 Things to Know About Free Shipping to learn more ways to score free delivery. You also don't want to pay too much for shipping by waiting until the last minute to send gifts to friends and family. For example, the U.S. Postal Service flat rate for shipping a medium-sized box by priority mail is $11.35 versus $39.95 for next-day express mail delivery.
8. Not keeping an eye on your airfare after you buy because most airlines and online travel agencies will give you a rebate -- usually in travel credits or vouchers -- if your flight’s price drops below what you paid. Yapta.com will send you alerts if the price drops on a flight you've booked. Be aware, though, that some airlines can charge hefty fees for re-booking your flight. If the fee outweighs your rebate, it's not worth it to make a change.
9. Being too generous with donations. If you stuff a few dollars into the Salvation Army pot every time you go to a store or say yes to every colleague who is collecting money at the office for a special cause, your generosity could easily break your budget. Choose an organization or two that you particularly care about and an amount you're willing to give, then politely say no to other requests for money. A note of caution: Be especially wary of e-mail and telephone solicitations because they could be scams (see 10 Online Risks to Avoid During the Holidays).
10. Tipping too much. Although tipping during the holidays shows your appreciation, you don't need to compensate everyone who provides a service. Nor should you tip too much (either because you don't know what is customary or you feel pressured to give beyond your budget). Consider handing out year-end tips to one to three people who have given you exemplary service during the year. Some prime candidates: baby sitters, hairstylists, cleaning persons, mail carriers, newspaper deliverers and nursing-home workers. Take our quiz on whom to tip during the holidays and see 6 Things to Know About Holiday Tipping to learn how much to give. If your budget does not permit tips or gifts this season, write a note thanking the individual for his or her service and explaining that you are not tipping because of your circumstances, not because of a lack of good service.
11. Going overboard with holiday décor. You don't need to turn into Clark Griswold from National Lampoon's Christmas Vacation and cover your house with lights. You can easily make your home look festive without spending big bucks on a light display and racking up a huge electric bill. Try the natural approach, instead -- fresh greenery collected for FREE from your yard or a friend's yard.
12. Buying bad gifts. Don't waste your money on gifts that no one wants, such as useless gadgets, tacky Christmas apparel or the infamous fruit cake. Instead, buy a gift card if you don't know exactly what to give someone on your list. Opt for all-purpose cards, such as an American Express or Visa gift card, rather than store-specific -- unless you know the person's favorite store. In that case, don't pay full price for a gift card. Visit sites such as Plastic Jungle and Gift Card Granny for discounted cards.
13. Granting your kids' every wish. You might not view buying every item on your children's wish list as a waste of money -- especially if you cherish seeing their eyes light up every time they open a gift. But keep in mind that many of those items might end up under a bed or in the back of a closet within just a few days. Your money will be better spent on a few items (or even just one item) you know they'll really use. See Kiplinger's kids and money expert Janet Bodnar's advice for getting through the holiday season without going overboard.
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