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Saving for holiday spending should start today

PETERSON AIR FORCE BASE, Colo. -- Christmas may still be six months away, but it is not too early to start saving for the holidays and prevent accumulation of holiday debt.

According to Consumer Nation, 59.2 percent of 2010's holiday spending was on Christmas. Americans spent a cumulative $135.16 billion during Christmas in 2010, making it the biggest holiday in terms of spending.

With the holiday season on the horizon, now is the time to start planning a budget and setting some money aside to pay for it all.

Not planning for holiday spending means planning for debt in January. Many Americans deal with January blues, as this is the time when December's bills are due.

Identify an amount of money that can be put aside to begin your monthly holiday fund until the holiday season arrives. By putting just $50 a month in a savings account July through December, families already have $300 set aside for holiday spending. Doing the same all year creates a $600 holiday fund.

Additional money can be saved in other ways. Cash in any loose change laying around your home and car. Sell any items not needed or used through free local sources, websites or yard sales. Review your budget to see if there are any areas where you may be overspending. Ask if military discounts are offered when making purchases, and put the money saved into your holiday fund. If you get an income tax refund, identify a portion of your refund to go into your holiday fund.

Additionally, you can spread your spending out by purchasing gifts slowly through the year during the "off-season" instead of all at one time. For example, you can usually buy a winter jacket or sweater on clearance just before summer.

Many stores offer credit cards and lure customers in by offering a 10 or 15 percent discount on the initial purchase. This can backfire if the card is not immediately paid off because the interest paid in the end exceeds the cash saved up front.

It is very easy to overspend using credit cards. Even when an individual is financially disciplined, opening several credit card accounts is not a good idea. Your credit score may also take a dip when several hard inquiries are done at the same time.

After the holidays, credit card companies make a lot of money in interest. Paying off holiday debt may take several months and the amount you pay in interest may be high. Creditors have no problem with the consumer paying the minimum every month, as this translates into more interest paid to them.

For example, if a family puts $500 in holiday expenses on a credit card with a 17 percent interest rate and makes a $50 monthly payment starting in January, it will take until November to pay those charges off. During that time, they will pay $43 in interest. That $43 would be much better spent saving for the next holiday season. There are several online calculators to calculate how long it will take to pay off a credit card and how much interest will be charged during that time.

By budgeting for the holidays in advance through contributions to a savings account, you can ease the financial burden during the holiday season. This will also help you further reduce your holiday expenses by avoiding interest charges. Think of credit card interest as giving your money away.

Once you define your holiday budget, try to stick with the plan and work toward building funds. Being proactive with your holiday fund will reduce stress that often comes with debt.

To discuss holiday budgets or any financial topics with an accredited financial counselor, contact the Airman and Family Readiness Center at 556-6141.

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