Budgeting During the Holidays: Virginia CPAs Offer Tips

Buying gifts for loved ones and traveling to see family can be expensive. As the holidays draw near, there are many simple spending habits that can help you conserve cash and cut down on overspending, according to the Virginia Society of CPAs. That way, you won’t have to use credit cards for your holiday purchases and rack up expensive interest charges.

Make a plan

To ensure you can afford your holiday wish list, begin planning now. Start by making a list of the gifts you’d like to buy; the traveling you’re likely to do and other expected expenses. For each one, come up with a realistic estimate of its cost.

Now, consider how much spare cash you’re likely to have for these purchases. If you don’t have a written budget, list your regular expenses, such as rent or mortgage, utilities, groceries and commuting costs. Total up your take-home pay as well as any other money you expect to receive or savings you might have set aside for holiday expenditures. Deduct your regular expenses from the total to find out how much you have left to spend on the holidays.

Look for savings opportunities

If the amount you have to spend won’t cover your wish list, start seeking places to trim costs. Options include:

• Choose eating in over eating out. Remember that taking out is usually less expensive than dining in a restaurant. You’ll probably eat fewer courses and eliminate paying a tip.
• Bring a calculator with you when you shop. This helps you keep track of your total and discourages impulse purchases of more expensive items.
• If you usually spend a lot of money at salons before holiday parties, let a trainee cut your hair or give you that manicure. Many hair salons or beauty schools offer services given by trainees at lower rates.
• Plan simpler parties. You can entertain while on a budget during the holidays by using your creativity. Throw a theme party and ask everyone to bring a dish from a different ethnic group, for example.

Be creative

Use your talents and creativity. Are there people on your list who would like to receive a homemade gift? Use your talent to bake cakes or cookies, knit a scarf or frame a favorite family photograph. Or perhaps you can donate your time by offering to clean your parent’s home, baby-sit for your sister’s children or give guitar lessons to a niece or nephew.

Space out your shopping

You’re more likely to overspend when you’re in a panic to find a suitable gift at the last minute. Rather than doing all of your shopping at the last minute, seek out sales and bargains as far in advance as possible.

If you find yourself overspending, commit to setting up a holiday savings account for next year. Determine how much you can afford to spend and divide the total by 12. That’s how much you need to save each month. To make it foolproof, arrange for automatic transfers from your checking account or your paycheck into your holiday savings account. When you get your check in the fall and start shopping, you can use cash instead of credit.

Paying with cash or credit

As a general rule, you should avoid using credit cards for holiday purchases. Unless you pay off all your credit card bills at the end of the month, those purchases can end up costing you significantly more due to credit card interest.

If — and only if — you are sure you can pay the balance off when the bill arrives, you might consider using a credit card to qualify for discounts, airline miles or extended warranties. For example, many retailers who have their own credit cards offer discounts of 20 percent or more when you use the store’s card to make purchases. You might also consider using a credit card when buying big-ticket items because, in some cases, if you are dissatisfied with a credit card purchase, you have the right to file a dispute.

Avoid delayed payment deals

“No payments due until 2009” deals tend to come with very high interest rates and penalties if you don’t pay by the designated date. Be sure to read the fine print before agreeing to one of these deals.

Let your CPA help

There are many simple ways to cut back on daily costs and reduce your long-term expenses as well. Ask your CPA for advice on the steps necessary to make a real difference in your financial life, now and throughout the year. For more smart spending tips, check out www.FinancialFitness.org, a Web site created by Virginia CPAs to help you build a solid financial future.

The Virginia Society of Certified Public Accountants (VSCPA) is the leading professional association dedicated to enhancing the success of CPAs. Founded in 1909, the VSCPA has approximately 8,300 members who work in public accounting, industry, government and education. For more information, please visit the Press Room on the VSCPA Web site at www.vscpa.com, e-mail communications@vscpa.com or call (800) 733-8272. For more information on financial literacy topics like money management, or to search for a CPA in your geographic region, visit www.FinancialFitness.org.