How to avoid holiday financial blunders

Associated Press

CHICAGO

The holiday season is full of pitfalls that can drain your bank account.

If you’re not careful, you can end up taking a year to pay for all the spending. More than 13 million shoppers are still paying off last year’s holiday debts, according to Consumer Reports.

It’s fine to cut back on gifts if your finances are stretched thin. But if you plan to join the holiday shop- a-palooza, remember that it’s not going against the holiday spirit to keep your bottom line in mind.

“You have to be smart,” says Gail Cunningham of the National Foundation for Credit Counseling. “Know how much you can spend in advance, and don’t get caught up in the holiday moment.”

Regardless of the size of your bank account, you’ll save plenty if you can avoid common holiday traps. Some are laid by retailers hungry for cash while others are simply a result of poor planning.

Here’s a look at some holiday money mistakes to avoid:

Discount fixation.

Retailers advertise deep discounts to get you to bite. But don’t take them at their word without comparing prices. A store’s sale price may reflect a markdown from the regular price, but there’s no guarantee the manufacturer’s suggested retail price isn’t actually lower. Think more about the item you’re buying.

No budget.

Skipping a holiday spending budget is a surefire way to overspend. Make a list that includes amounts for each person you want to buy a gift for and stick to it. Be sure to create an overall budget that factors in other holiday-related expenses. Without a plan, you’ll get caught up in the hype and go for the feel-good purchase.

Debit dangers.

Debit cards carry the advantage of taking money from your account and not saddling you with future payments. But using them on big items is risky because they don’t offer the purchase protections that credit cards do.

Return policy missteps.

Tossing away receipts can be costly. Their obvious value is for exchanges or returns, but there’s another plus too: If the price is lowered after you buy an item, a receipt should enable you to get a credit for the difference. Be aware that return policies are changing, however, and retailers are increasingly refusing some returns or giving gift cards for the amount in question.

Extended warranties.

Here’s when to buy an extended warranty, says Greg Daugherty, executive editor of Consumer Reports: “Basically never.” The manufacturer’s warranty should protect you against any defect for up to a year, and the cost of protection beyond that generally isn’t worth it.