MADELEINE BRAND, host:
Nothing can test your financial discipline like holiday shopping. So those who want to be money smart often set a few strict rules before heading to the mall: One, make a list; two, put away your credit cards and pay in cash; three, don't wait until the last minute. Wrong, wrong, wrong, says Michelle Singletary. She's DAY TO DAY's regular personal finance contributor. She's here with us now with some surprising advice for holiday shoppers.
MICHELLE SINGLETARY reporting:
BRAND: So what is wrong with making a list before going shopping?
SINGLETARY: Well, if you make the list first, then everybody and their mama is going to be on your list because we're, I think, at heart very generous people. But what you should do is set your budget first and then make your list because once you realize how little you have to spend, you start scratching people off your list.
BRAND: Wow. Evil. Hi, Scrooge.
(Soundbite of laughter)
SINGLETARY: Absolutely not. Oh, my goodness, people overspend at the holidays, and, honestly, why do that? We can never think of what to buy people because we all have everything we actually need. And so there are lots of people on your list that you don't need to get a gift for for the holiday season, especially if you're already in debt or one of your New Year's resolutions is to get out of debt. So, you know, listen, give to the essential people, and then the other folks--send them a nice card, call them up, visit them. There are many ways that we can show our appreciation without going further into debt.
BRAND: Well, speaking of debt, many financial experts say avoid using credit cards to stay out of debt when you go shopping, but you say charge it. Why?
SINGLETARY: Well, you know, you shouldn't use your credit card unless you can pay the bill off the next month, but there's lots of advantages to using credit. You get lots of protections that you don't with cash, consumer protections in case it doesn't work or doesn't get delivered when it's supposed to. But once you give a merchant that cash, you're at that merchant's mercy.
BRAND: OK. Now another rule: People are usually advised not to wait until the last minute to do their shopping. And we're getting down to the wire now. You say go ahead and wait. Why?
SINGLETARY: That's right, wait till Christmas Eve--the store's about the close--because you'll have less time to buy more stuff that people don't need anyway. So you go with your budget, and you got your shorter list. You go in, you get some things, and you may actually end up getting more practical things 'cause all the nice, fancy, cool stuff is gone. So your kids will get those socks that they really need.
(Soundbite of laughter)
BRAND: Oh, gosh. Boy, I'm kind of glad I'm not on your list.
SINGLETARY: Oh, no, you would love to be on my list. I give good gifts. But, listen, obviously some of this I'm doing in tongue and cheek. But I do think that because we have more time--and I hear people so proudly say, `I shop for Christmas the whole year.' Well, that means that you're spending a whole year buying stuff. And if you shorten the time, as you shorten your list, I think you'll end up buying stuff for people that is much more practical and usable rather than, you know, these trendy things or, you know, very expensive electronic gifts. So that's really what I mean. Just give it more thought. And if you don't have a lot of time to shop, honestly, you will spend less money.
BRAND: I don't know. Michelle, do you have a rule of thumb for setting a budget for going out and shopping? Should it be X percent of your income?
SINGLETARY: I don't think it should be X percent of your income, but I think you should look at after you've paid all your other expenses during the year--you're funding your retirement plan, you've got a college fund for your kids if you've got kids, you've got your emergency fund, all your bills are paid on time. And then you could look at, `Who in my universe I want to give things to and how much do I want to spend?' So for some people, it may be $200. For some people, it may be $2,000. But whatever you do, make sure it's affordable and it's something that you have in your savings. Even if you're going to use your credit card, you ought to make sure that you've got that money saved up first.
BRAND: Michelle Singletary writes The Color of Money column for The Washington Post, and she joins us regularly for conversations about personal finance.
Thank you very much, Michelle.
SINGLETARY: You're welcome.
BRAND: Happy shopping.
SINGLETARY: Happy shopping to you as well.
BRAND: Or I should say happy saving.
SINGLETARY: That's right.
(Soundbite of laughter)
SINGLETARY: I like that much better.
BRAND: DAY TO DAY is a production of NPR News, with contributions from slate.com. I'm Madeleine Brand.
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