NEW YORK (MainStreet) — As the holiday shopping season begins, setting a budget before you hit the stores puts you on track to enjoy the holidays debt-free.
With 140 million people expected to shop on Black Friday weekend, according to the National Retail Federation, it's tempting to spend beyond your means, especially as retailers pull every lever to not only lure you into stores, but also keep you there longer.
On top of this, slow GDP growth, stagnant wages and unemployment add to the economic storm, prompting retailers to brace for a lackluster holiday shopping season.
When it comes to developing a budget, some research and planning go a long way.
1. How much will you spend?
Entering the holiday season without a specific spending limit is bound to put you in debt, making for a rude awakening when the bills are due.
Figure out whom you'll be buying gifts for, and make a strict spending cap per person. Add up this figure, plus a 10 to 15% cushion, and that should be your final holiday shopping budget.
Also, it's not just the big-ticket items you need to budget for. "Don't forget about little expenses that can add up, such as food for entertaining, groceries for baking or holiday treats, postage if you send holiday cards and home decorations, to name a few," says Gerri Detweiler, director of consumer education at Credit.com.
2. Set some cash aside
Using cash is a guaranteed way to stay out of debt. Financing your holiday shopping using credit cards is fine if you pay off the balance in full.
Many consumers plan to do this but end up falling through on this plan and become slammed with interest expenses. Why spend $500 on gifts this season and then get hit with a 25% APR? That's throwing money down the drain.
"The last thing you want to do is head into 2014 with a boatload of debt," says Trae Bodge, senior editor at RetailMeNot.com.
3. Be mindful of credit card rewards
Once you sock away cash for your shopping, check to see if your credit card offers a special cash rewards bonus for the holiday season. For example, Citi credit cards offer 5% cash back at Best Buy for the rest of the year. Chase Freedom card offers 5% back at Amazon and Discover It card offers 5% back on online purchases. A 5% cash back bonus is like a 5% coupon on everything you purchase.
Plus, if you have the cash on hand already, you can still pay off the balance in full and you'll get the reward from the credit card - the best of both worlds.
4. Know where the sales are
Aligning your holiday shopping list to the front covers of the store's circular is a great way to take advantage of the store's deep discounts and stretch your holiday budget.
Be flexible with brands and product types, as some brands tend to go on sale more frequently than others.
5. Give yourself a "budget grade"
In early December, towards the middle of the holiday shopping season, it's time to assess how you're doing. Tally up your spending thus far to see if it's in line with your budget. This way, there won't be any surprises after the holiday season when it comes to figuring out how much you actually spent.
You can also track your spending as you shop in real-time, thanks to the free OneReceipt app available on the iPhone and the free Expensify app on Android. Both apps allow users to take photos of the receipt after making a purchase.
- Written by Scott Gamm for MainStreet. Gamm is author of MORE MONEY, PLEASE