Avoid bankruptcy; practice credit score and debt management: Christmas and birthday spending on a budget

Celebrating Christmas, an anniversary, or a family member's birthday can bring lots of positive things to your family table: good cheer, togetherness, great food, and shared laughter. However, these celebrations can bring some not-so-nice side effects to your personal budget: additional credit card debt, sinking credit scores, and even, the threat of bankruptcy, depending upon your personal situation.

It's tempting, and all too easy to rack up credit card bills for a special occasion. In the United States, we are bombarded day in and day out with commercials emphasizing the importance of spending lots of money on lavish gifts for Christmas, birthdays, and other holidays. After all, gifts really show that you care, right? And, so does food. If you cook a mega-meal for the family on holidays, or supply your child's friends with party treats, pizzas, and sweets galore, you're “showing your love” by spending cash quickly -- and possibly, amassing debt rapidly.

It's hard not to go all out on Christmas, or for birthdays and anniversaries, when we so often equate material goods with love. Diamonds and fancy jewelry are synonymous with lifetime love and commitment, according to advertising (of course, the hidden costs – purchasing them on high-interest credit cards, accruing debt, sinking your credit score – are never mentioned). Children and parents are bombarded with myriad commercials for the latest, expensive toys and gadgets – and when the children get the “gimmies,” the parents get the credit card debt. The Christmas season begins before Thanksgiving, now – and the first Friday after T-Day, aptly named “Black Friday” to reflect the profits retail chains will turn at this time of year, virtually encourages profligate spending. Nowadays, racking up debts, mis-managing money, and teetering on the edge of bankruptcy for the holidays are all acceptable, even competitive sports.

So, what's a guy or gal on a debt management or credit score restoration plan to do?

Scale back expectations

You don't need to have a big birthday party for a child or family member. The favors, the rich and exotic foods, and the expensive drinks will not be remembered after the day of the party. You can have a birthday or holiday celebration for next to nothing. Instead of preparing a lavish spread, ask your family members to chip in and help you defray the costs. If everyone contributes just five dollars, you can buy a lot of food for little money (see the “Frugal Food” article for more details).

For birthdays, you might just serve dessert and coffee (milk for the kids) to help cut down on costs. A large sheet cake from the local grocer can be a steal, and usually tastes as good as a custom-made, gourmet pastry creation. If you must have food, and don't want to ask others for money outright, throw a potluck, and encourage everyone to bring a side dish, casserole, or dessert.

Avoid alcohol. It's expensive – in fact, it can be one of the biggest contributors to debt when planning a party. You can make a big bowl of punch with just ginger ale and fruit juice. If you must add alcohol, you can spike the punch with low-cost vodka.

When it comes to gifts, more is less

You don't need to run up massive credit card bills to adequately celebrate Christmas or a birthday. What's the point? The recipient or recipients might not like your gift picks, your efforts are likely to be forgotten after the holiday is over, and gifts do not equal love or togetherness, anyway.

Get creative. If you're crafty, make mini paintings for your gift recipients; or knit useful clothing, or treat everyone to one of your famous wood carvings. If you're not so crafty, offer services. You can print up coupons for 12 trips to the playground for your child – and any adult gift recipient will appreciate offers to clean and organize their living spaces; help them file their taxes, or assist them with fixing up items and appliances around the house.

For Christmas and other major gift-giving holidays, consider a family grab-bag. If you like, feel free to establish a dollar limit – for example, state that the retail value of each gift cannot exceed 25 dollars. If it's a birthday you're celebrating, round up a group of people to chip in for one, big gift. If everyone puts in just five or 10 dollars, the birthday boy or girl can wind up getting something quite nice.

If you're in the process of declaring bankruptcy, have severe debt management issues, or are literally broke, don't be afraid to opt out of the holiday or birthday. Admitting that you're suffering from financial difficulties can be a tremendous psychological relief – and, you'd be surprised at how many people are sympathetic or even willing to help.

Finally, whatever you do, avoid the temptation to put gift and party purchases on credit cards. You'll be paying on the bills for months to come, plus the medium-to-high credit interest rates accrued, which can make the final debt sums staggering. Establish a rule: “If I can't pay for it in cash, then I can't pay for it at all.”

Happy celebrating!