Paying Off Holiday Bills

by Gary Foreman

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Many people dread January. That's when the bills come due for all the gifts and holiday partying. According to the National Retail Federation, Americans were expected to generate over $450 billion in retail sales during November and December.

Not surprisingly, much of the spending is done with plastic. estimated that between credit, debit and store cards, shoppers will sign for $135 billion in goods and services for the holidays. The largest portion of that ($85 billion) will be on credit cards.

The results? A lot of people will be facing nasty credit card bills in January. Consumer Reports expects the average holiday credit bill will be $626. Depending on how big the balance, it may take until summer to pay it off. What's a consumer to do?

Just as the smart shopper compared prices in November and December, the smart credit card user pays off the resulting bills as quickly as possible. The reason is simple. If their interest rate is 18% (a little high, but not an uncommon rate), the cost of that sweater for Aunt Polly goes up by 1.5% per month. So much for the big sale!

Some people may be fortunate and find one or two things that they can do to completely pay off their holiday bills. There are a few places that you might find hundreds of dollars of savings.

One such place is in your auto or homeowners' insurance. It's possible that you have the wrong coverage or by comparison shopping you can cut your premium significantly. Talk to your agent about your coverage. Then check with an independent insurance agent or comparison website to see if you're getting the best rates.

Most of us will need to chip away at the credit card balance a little at a time. And some ideas will require a bit of sacrifice (never a popular idea).

One place to look for savings to put towards the bills is something you get via subscription. Like the premium services from your cable company. Or your membership in a video rental club. Or other services that are automatically charged each month. Each one might only represent $10 or $15, but you only need to take action once to save money each and every month thereafter.

The biggest target for saving is in the food and grocery area. The reason is simple. We spend about 20% of our money on food. So we're dealing with a large amount of spending. And we're making decisions about buying food all the time. Whether it's the weekly trip to buy groceries or the daily visit to the company cafeteria at lunch or break time, we make many small buying decisions that add up quickly.

Look first at your habits. Think of where you're buying food each day. For some people, it's lunch out with the gang. Bringing in the previous night's leftovers could save you $30 a week.

For others, it's the morning and afternoon break times that find you reaching into your pocket. Even a $1 cup of coffee or soda adds up if you do it two or three times a day.

Your grocery shopping can yield big savings. For instance, a pricebook is an invaluable tool. It's a simple listing of items that you purchase regularly (i.e. milk, bread, ground beef, etc.) and the lowest price that you've paid for it recently. The most effective pricebooks include one sheet for each item. On the page is the store name, date and price that was low.

Taking the pricebook to the store allows the shopper to quickly identify real sales. That gives them the opportunity to stock-up on an item when the price is right. It's common for people to report savings of 10% or more. And, that's without changing the items that they buy. It just changes when and at what price they buy them.

Don't forget the food that you purchase away from the grocery store. We're spending nearly half of our food budget on meals that are prepared outside the home. Restaurants are an expensive place to buy your groceries. For most simple meals, you can buy the ingredients for about 1/3 of the restaurant price.

One reason that we eat out so often is to save time. But there are other ways to feed your family without spending hours in the kitchen. Freezer meals can replace the drive-thru window and save you money.

Many recipes are well suited for freezing. It's easy enough to prepare two meals at once. Prepare one for tonight's dinner and the second for the freezer. If you do a search on "freezer meals," you'll find quite a bit of info. Two of my favorite sources for information and recipes are Debi Taylor-Hough and Leanne Ely. Both are experts at making your freezer your best friend at dinnertime!

For most families, it will take a combination to conquer the holiday bills. And some determination. The easiest thing to do is to just pay the monthly credit card minimum. But that's the best way to pay the most for the holidays and go from Santa last year to Scrooge this year!

True or False

Debt from my past is preventing me from saving for my future! Tell us: Yes, debt is hindering my ability to save! or No, debt is not a problem but I am trying to get ahead financially!

Gary Foreman

Gary Foreman is a former financial planner and purchasing manager who founded The Dollar website and newsletters in 1996. He's been featured in MSN Money, Yahoo Finance, Fox Business, The Nightly Business Report, US News Money and Gary shares his philosophy of money here. You can follow Gary on Twitter or visit Gary Foreman on Google+. Gary is also available for audio, video or print interviews. For more info see his media page.

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