How to Dodge 4 Expensive December Disasters

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A poll conducted a few years ago by the American Psychological Association found that 80% of Americans expect to be stressed during the holiday season. While not a shocking statistic, it's pretty depressing that amid what's supposed to be "the most wonderful time of the year," eight out of 10 of us are tearing our hair out.

One source of stress? Those unexpected costs that creep up on us in December.

This year, don't let seasonal slip-ups shatter your spirits -- or your budget. Here's some advice on how to handle common -- and costly -- December disasters, from gift gaffes to pricey travel trip-ups.

The unexpected gift surprise: With money tight, many of us aren't able to give gifts to everyone we'd like to this year. But what do you do when you're lucky recipient of a gift from someone who didn't make your original list? The typical expert advice is to stock a gift closet with extra wrapped presents, but that's a pricey solution, and chances are, the gift-giver won't be fooled anyway. Simply accept the gift graciously and move on. By not reciprocating this year, you reduce the chances (and the cost) of repeating the awkward one-sided swap again next year.

The out-of-stock overpriced item: That must-have toy your daughter simply will die if she doesn't get? Turns out it's backordered and won't arrive before Christmas. Or you don't have the money just yet -- a common problem for many families this year. Now what?

Relax about the holiday deadline and wait until later.

One big benefit to post-holiday gifting? Rock-bottom prices at the after-Christmas sales. And not having the item on the actual gift-giving day needn't dampen anyone's holiday spirits. Simply print out a photo of the item and wrap it beautifully, along with a note that explains when it will arrive, along with something else fun -- and inexpensive -- for the recipient to enjoy in the meantime. For an older child or an adult, try wrapping up some magazines and favorite snacks along with the IOU.

Costly car calamities: Driving long-distance for your festivities? Consider taking the season as a cue to sign up for AAA. Winter weather can wreak havoc on the roads. You could get stuck spending hundreds of dollars on towing, battery jumps, and, if worst comes to worst, hotel rooms. A little planning ahead helps, too -- factoring long delays that don't materialize into your schedule is far less stressful than the reverse. If your travel route is snow-prone, keep the gas tank full, your cell phone charged, and make sure to have extra blankets, food and water along just in case. You'll be better prepared and prevent having to pay extra for supplies on the road.

Expensive air travel agitation: Delayed or cancelled flights. Surprise snowstorms. Take it from someone who once spent Christmas Eve in a dingy Minneapolis hotel (thank you, Northwest Airlines) -- nothing casts a pall over holiday plans quicker than a travel trip-up. To reduce the chances of travel travails, start by programming your airline's customer service number into your phone before you head to the airport. As soon as it's clear there's a problem, you can skip the lines and rebook over the phone. And know your rights -- you don't want to shell out for food or a hotel room if you're entitled to vouchers. (And even if you're not, asking nicely sometimes works.)

Second, pack a few snacks, an empty water bottle, and a toothbrush in your carry-on so you don't have to pay airport prices. If you're traveling with kids, make sure you add a few little treats and a special toy. If you do get stuck somewhere, those few items will make the delay significantly more bearable.


Motley Fool contributor Robyn Gearey does not own shares of the companies mentioned.


How to Dodge 4 Expensive December Disasters

Two ever-popular resolutions are to lose weight and quit smoking. Those are good ideas not just for your health, but for your wallet, too.

According to research from eHealthInsurance, smokers pay an average monthly health insurance premium that's 14% higher than for nonsmokers. Being heavy costs big too: Obese policyholders pay 22.6% more on average than their normal-weight counterparts.

As an added incentive, some employers and insurers are offering rewards in the form of gift cards or discounted deductibles for employees with healthy habits and fewer sick visits to the doctor.

Vicky Oliver, in her column Eight New Year's Resolutions for Frugalistas, advises trying to stay one step ahead of the retailers who are forever luring us with clever marketing strategies. "BOGO" sales (Buy-One-Get-One), she points out, only save you money if you actually want the second item. Ditto for "loss leaders," -- items the store under-prices so far that it loses money on them, in the hope that once you're there to buy them, you'll also pick up some higher-margin items that will allow them to turn a profit on you. Using special promotions and loss leaders only when they can really supercharge your savings -- and shunning them otherwise -- is the best frugalista formula, Oliver says.

She also recommends becoming a "groupie." Take advantage of the power of group buying sites, like Groupon and LivingSocial, that offer deep discounts, and special promotions from social sites like foursquare.

What's complex can be intimidating, and therefore tempting to ignore. Vow to simplify your financial life.

For starters, put bill-paying on auto-pilot. If you're still writing and mailing checks, set up online accounts so that bills are paid automatically. In addition to giving you easy access to your bank and credit-card accounts and spending history, going paperless has an unexpected benefit: People who pay bills online are happier.

Automate savings too. To the extent your cash-flow permits, max out your contributions to tax-advantaged savings vehicles -- 401(k)s, traditional or Roth IRAs, and 529 plans for college savings, advises Benjamin Sullivan, a financial planner with Palisades Hudson Financial Group. Also, reduce the number of retirement accounts you have by consolidating 401(k)s from former employers and any other traditional IRAs into one rollover IRA.

If the last few years have taught us only one thing, it's that you can't afford to be in the dark about money matters. Make 2012 the year to focus on your financial education.

The more knowledgeable you are, the more active you'll be in planning to reach your financial goals, says Bob Stammers, director of investor education at the CFA Institute, a nonprofit organization of investment professionals. Consider joining an investment club, or take advantage of any investing help that may be offered by your employer, such as one-on-one professional advice or educational workshops.

For most of us, it's less a matter of if an emergency will arise than when. And anyone who's been out of work for any length of time at all knows how quickly you can deplete your resources.

Start an emergency fund if you don't already have one. According to Susan E. S. Howe, a Philadelphia-based CPA and a member of the National CPA Financial Literacy Commission, your emergency fund should have enough cash to cover at least three months of basic expenses.

It make take a while to reach that goal, but keeping track of where you spend your money even for a week can help you identify ways to cut back and start saving. Put all your change in a bucket for a month to see just how much money you could be saving rather painlessly, says Luke Vandermillen, vice president of retirement and investor services with the Principal Financial Group. Consider using that spare change to build or add to an emergency fund. If you're paying someone to mow your grass or wash your car, do it yourself and stash the extra cash. Not only will having a safety cushion help you when personal emergencies arise, it will also help you feel more comfortable during ups and downs in the economy.

Here's a risk-free place to put your money with a surefire return on investment of well over 10%, suggests Michael Kresh, president of Creative Wealth Management: Pay off your high interest debt. If you're getting charged 12.99% on your Visa account balance, and you're earning 1% on your money market account, take money out of the money market to pay off the credit card -- you'll end up with an 11.99% return.

Try to pay more than the minimum each month. Bankrate.com's credit card minimum payment calculator can show you how paying just a little more each month can dramatically reduce overall payback time.

If you're staggering under the weight of credit card debt and don't have the cash to pay it off, consider getting help from a nonprofit debt management program, such as the one offered by the National Foundation for Credit Counseling.

One key to getting financially fit is a creating a household budget. You don't have to get too granular, so skip the complicated categories and subcategories. While having all those details may seem like a great way to help you understand your spending, a budget designed that way is unrealistic to maintain for the long term, says Devin Miller, CEO of Balance Financial.

Automate the tracking process as much as possible. Look for budgeting tools that do the work for you -- aggregating disparate accounts into one place, downloading data nightly, categorizing/memorizing transactions and more.

Monitor your progress. "No one gets it right on the first try, so check in regularly to make sure you have a clear understanding of how much money you have spent or have left, and adjust your budget accordingly," says Miller.

Be transparent. A household budget isn't a state secret. Keep your spouse or significant other up to date on spending, remaining funds and what the priority expenses are to ensure you're on the same page.

The New Year is a fresh start. Learn from last year's mistakes and move on. As for this year's resolutions, don't mean to change, do change.

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