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Creating a spending plan will save you over the long term

This year, start the holidays off on the right foot.

That means don't charge up a storm during your holiday shopping and celebrating — or you'll end up with a financial hangover in January and beyond.

"People have to remember that whatever debt they have (accumulated) in the last five weeks of the year, they're going to start off with in 2012," said John Ulzheimer, president of consumer education at SmartCredit.com. "And it's generally not a good idea to start off the new year in credit card debt because it's so expensive.

"This is why a lot of New Year's resolutions are, 'I want to get out of debt,' " he added.

Here's how to ensure you don't end up in the post-holiday hole:

ASSESS YOUR FINANCES: If you've lost your job and there's little or no income coming in, be honest with your family about what to expect.

"A lot of people have guilt and they say, 'We can't not have Christmas,' " said Todd Mark, vice president of education at Consumer Credit Counseling Service of Greater Dallas. "In reality, you could.

If you're facing a financial crisis, being the best parent is being most responsible with your limited resources. Nobody is going to enjoy opening up presents on Christmas day with the lights turned off."

You can still create holiday memories that will last much longer and be more meaningful.

"Time and love are so much more important than anything you can buy at the mall," Mark said. "Refocus and say, 'Instead of opening up presents, we're going to do a volunteer project today and we're going to help people less fortunate than ourselves.' It's memories that people cherish, not things."

SHOP EARLIER: Don't wait to shop until the last minute.

"People wait too long, and then you've got to get a gift — any gift," said Jason Alderman, director of Visa Inc.'s financial education programs. "So what do we do when we panic? We throw money at it, and we spend too much."

SET A BUDGET: "You must have a roadmap for your spending on this or else you're destined to overspend," Alderman said.

Start with a "micro-budget."

"Make a list of everybody you're buying for and you put a dollar amount next to every name, and then you think about what would be relevant gifts within that price range," Mark said.

"As you're comparing ads, think about what people want or what's already on your list instead of reacting simply to a sale," he added. "Is it the $100 that you're saving or is it really $300 that you didn't really intend on spending in the first place?"

STAY FOCUSED: "If you miss the great bargain, don't just replace it with the next closest thing at full retail price," Mark said. "That's one of the most detrimental things you can do to your holiday budget. Once you've checked off somebody on your list, be done with them."

If you spend more than you budgeted, compensate for that.

"If you're adding a $75 gift, you have to take off $75 from somewhere on the list," Mark said.

USE CASH: "The best way to stick to your budget and avoid impulse spending is to pay in cash," said Bill Hardekopf, chief executive of LowCards.com.

"Pulling cash out of your wallet or purse and handing it to someone else is painful and a reminder that the less you spend, the more you can keep," he said.

PAY BACK QUICKLY: If you must use credit, use the card with the lowest annual percentage rate and don't let the debt linger.

"Don't charge more than you can really expect to pay off within three months," Mark said. "We generally say if you're going into April and you've still got holiday debt, it usually becomes a permanent addition to your budget, and you'll be paying on those next holiday season."

Consider this: If you charge $1,000 on a credit card with an annual percentage rate of 15 percent and pay just $30 each month, it would take 44 months to pay off Christmas 2011, and you'd pay an additional $302 in interest, Hardekopf said.

AVOID RETAILERS' CARDS: Don't apply for retailers' credit cards just to get the one-time discount. It's not worth it.

Be aware that you can damage your credit in several ways by applying for retailers' credit cards.

For starters, each time you apply for a credit card, you trigger an inquiry with a credit bureau in which the lender asks for a copy of your credit report.

Having many inquiries within a short period makes you look desperate for credit and hurts your credit score. You're indicating that you're willing to take on a bunch of new revolving debt in a short period of time, which is a red flag to creditors.

"These are among the worst type of inquiry for your credit score," said Ulzheimer at SmartCredit.com.

Additionally, retailers' cards are expensive, he said.

"Interest rates on store cards are almost always well into the 20s and the credit limits are initially very low, usually below $1,000," Ulzheimer said. "These are your terms regardless of your credit scores."

Carrying even small balances will "quickly negate any discount you received and can lower your credit scores" because the balance-to-credit limit ratio will be higher, he said.

"Using multiple cards populates your credit reports with nuisance balances, which can lower your credit scores, while making the same purchases, in aggregate, on a general-use credit card with a high credit limit would be much less damaging," Ulzheimer said.