The holiday shopping season is getting underway, but despite the not-so-gentle prodding of retailers and some economists, Americans are in no mood to overspend.
Millions are still struggling with unemployment or reduced income. Others are concerned about job security, home values and their stock portfolios even though the U.S. economy is growing again. Nearly two-thirds of consumers said the economy would affect their holidays, according to a National Retail Federation survey, with 84.2% of those respondents saying they would spend less.
They are people like Jaclyn Witt, an editorial assistant at Chapman University who is working less and worrying more this holiday season.
"I went from working full time to working part time, so I have to be more price-conscious," said Witt, 25. "I can't go buying whatever I want now. As it gets closer to Christmas, it's becoming more of a concern."
But you can still make merry without blowing your holiday budget. And we're not talking regifting a fruitcake either. Little tricks like shopping early, avoiding credit cards and sticking with last year's decorations could help you save a bundle.
Setting a budget
There's no formula for how much you should spend on the holidays, but some experts suggest limiting yourself to what you earn after taxes in three working days.
A more generous measure is to spend no more than 1% to 2% of your annual income on the holidays, said Morris Hamm, a personal finance expert and professor at the University of Phoenix. That's down from the 2% to 3% he recommended before the recession.
Once you've set a budget, make a list of everything you plan to spend money on. Include not just gifts for family and friends but travel expenses, entertaining costs and decorations such as the Christmas tree and tinsel.
If that total is significantly over the amount you plan to spend, start cutting items (or people) out.
"The economy has been so bad for so long that people are going to be thought of not necessarily as cheap but frugal and wise," Hamm said.
Before you hit the mall, create a separate budget for every person who remains on your list -- and stick to it. Think of a few gift ideas in advance and jot down their approximate cost; that way, you're less likely to make impulse purchases.
The best holiday deals will be found in toy aisles and on bookshelves this year, industry watchers say.
For weeks, the nation's top sellers have been aggressively slashing prices in an all-out holiday toy war.
In September, Toys R Us Inc. announced that it would open 350 Holiday Express toy locations nationwide that would feature the "hottest gifts" -- including dolls, action figures and educational games -- at "great values."
Two weeks later, Wal-Mart Stores Inc. said it was expanding its lineup of $10 toys from 10 items last year to more than 100 this holiday season; some of the toys will feature markdowns of as much as 50%.
The world's largest retailer also said it would announce new holiday pricing reductions every week.
"Many of these prices represent the lowest we've offered in years, because we know these are tough times for American families," Eduardo Castro-Wright, vice chairman of Wal-Mart, said in a statement. "We made a purposeful decision to focus initially on everyday staples as well as items that often require larger spending commitments in preparation for Thanksgiving and Christmas."
A price war has also broken out among booksellers, with Wal-Mart, Target Corp. and Amazon.com Inc. lowering online pre-order prices on several titles to $9 or less.
"This time last year, everyone was hit with the shock of the meltdown, so any price promotion there was reactionary," said Sean McGowan, an analyst at Needham & Co. "This year, battle plans have been drawn."
Cash or layaway
An easy way to manage your budget is to stick to cash. Don't succumb to the temptation of plastic.
"With credit cards it's like free money," said Jackie Fernandez, a partner at accounting firm Deloitte & Touche. "By the time the bill comes, you're way over the budget that you set."
If you have to use credit cards, fewer is better.
Gail Cunningham, a spokeswoman at the National Foundation for Credit Counseling, recommends using only two credit cards: One for the charges you intend to pay off that month, and the other for purchases you know you'll have to pay off over time.
"With the holidays you may have to admit that you won't be able to pay off everything in January when the bill arrives," she said. "But don't allow yourself to spend more than you can pay off in three months."
Layaway is another tactic that has made a comeback during the recession.
Shoppers put down a deposit on the items they want and pay them off -- usually over 30 to 60 days -- before taking them home.
Layaway became popular during the Great Depression and was commonly used by consumers who couldn't afford to pay cash upfront. But once credit cards became widely available, layaway all but disappeared.
Now, after pulling back on layaway programs for years, retailers are again touting the service as a financially savvy way to buy goods.
Toys R Us recently began offering layaway on hundreds of items, and Kmart and Sears introduced online layaway this year to complement their in-store programs.
One way to spend less is by haggling, which has become more socially acceptable as consumers scrimp on their purchases.
It's easier to haggle at independent shops than at major chain stores because small-business owners generally have more leeway in making deals than do employees at national retail giants. But it still doesn't hurt to ask.
"Definitely try to negotiate a price," said Britt Beemer, chairman of consumer behavior firm America's Research Group. "I think you're going to be successful 80% of the time. Don't feel bad about saying, 'If I buy more, can I get a discount?' or, 'Is this your lowest price today?' "
Just about anything goes when trying to strike a deal, but experts said shoppers should avoid making outrageously low offers that sellers could find insulting.
A good strategy is to haggle on merchandise that has been sitting on shelves for a while, because retailers are more eager to move it. You can also research prices on comparable items at other stores so sellers know you're a savvy shopper.
Timing it right
Getting an early start on holiday shopping will be key to saving money and buying the best gifts this year, experts say.
"If there was ever a holiday season to buy early, this is it," said Tracy Mullin, president of the National Retail Federation.
That's because retailers have ordered less inventory for the holidays to avoid being stuck with an excess of unsold goods like last year. According to the National Retail Federation's October Port Tracker report, traffic at the nation's ports has scaled back to levels not seen since 2003.
"Retailers knew going in that consumers would be very price-conscious and frugal for the holiday season, so they've been planning accordingly," said Ellen Davis, vice president of the retail group.
The strategy may help merchants but could leave last-minute shoppers with slim pickings. It could also mean fewer steep markdowns.
"If there is any hot holiday item that emerges or any particular category that does well, it would be in many shoppers' best interest to make sure they buy that merchandise sooner rather than later," Davis said.
Do it yourself
Gift giving can be an especially challenging task if you're out of work. The key is to remain thoughtful without coming off as cheap.
"Get personal," Fernandez said. "Most people recognize that everyone's financially in a bind this year, so the expectations are really low."
Instead of turning to the dreaded practice of regifting your unwanted goods -- 2008 calendar, anyone? -- how about items of real value that you're ready to pass on, like an antique vase or an heirloom that's ripe for the next generation? You could also give an unused gift card or frequent flier miles.
Other gifts might be moderately priced but extremely thoughtful. Getting a book signed by the author doesn't cost any more than buying it off the shelf, but it turns an inexpensive gift into a special occasion. Photo albums featuring friends or family and their loved ones also make moderately priced but cherished gifts.
Teri Gahre, 51, said her holiday gift plans include making quilts and canning jams and jellies. Her favorite do-it-yourself present involves letting the recipient have some fun in the kitchen.
"I'll take a glass jar and in there layer the ingredients for brownies: flour, chocolate, nuts and brown sugar," said Gahre, a speech pathologist. "Then I'll tie that with a real pretty bow and attach to that the recipe."
You can also save a lot of money by scrimping on wrappings. Many stores offer gift boxes, tissue paper and ribbon behind the counter -- you just have to ask. Or you can be eco-friendly and wrap your presents in newspaper.
"Frugal has become fashionable, so I don't think anyone is going to expect a lavish, excessive Christmas," said Cunningham of the National Foundation for Credit Counseling. "I don't think people owe any apologies for trimming back."