You have the upper hand

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Donna Rosato
Senior Writer, Money magazine

The day after Thanksgiving is traditionally known as Black Friday because – as the busiest shopping day of the year – it goes a long way toward determining whether retailers end up “in the black” – making a profit, rather than "in the red," which is a loss.

This year, retailers are bleeding red ink in the worst slowdown in decades. More than half of consumers say they will be spending less on holiday gifts this year and nearly a third plan to spend “much less” than last year, reports the Consumer Federation of America and the Credit Union National Association. That "more than half" is up from 30% to 35% of consumers who said they planned to cut back in the 2003-2007 years.

That means shoppers have the upper hand. To lure you in, retailers have been slashing prices on everything since September from cars to clothes. The discounts on Black Friday could be epic this year.

But don’t worry if you don’t want to brave the crowds on Friday. The deals should keep coming. Kohl’s, for example, says it will promote one item a day from Dec. 1 through Christmas with discounts of as much as 75%. Best Buy and Wal-Mart also plan to offer more promotions before Christmas.

That doesn’t mean you should wait till the last minute to do your shopping. Retailers have leaner inventories this year. So if you looking to buy a hot item – say, Guitar Hero World Tour – you should buy it when you see it on sale because it might not be around later. If you see an item go on sale a week or two later after you buy it, many stores offer price adjustments programs even during the holidays. Just do it right away and be sure to save your receipts to prove you paid a higher price.

If you’re one of the many people cutting back on holiday spending this year, here are some tips to help you stay within your budget:

• Make a List and Stick to It. Before you begin shopping, figure out how much you can spend and who you are buying gifts for, then assign a dollar amount to each person. You’re much more likely to stick to a spending plan if you’ve got it all written down. Don’t forget to factor in the costs of the holiday, including meals, cards, wrapping paper, postage, entertaining and travel.
• Shop Online. Give yourself plenty of time for gift getting so you don’t find yourself scrambling at the last minute when impulsive buying can be expensive. Before you head out, use the Web to do research and comparison shop at sites like Shopzilla, ConsumerSearch.com and DealNews.com. Just because a store is offering a discount, that doesn’t mean it's offering the best price you can find. Plus, if you shop online, you may never have to step out of your house. Online retailers plan to offer more deals and promotions to spur holiday shopping on the Monday after Thanksgiving this year: 83.7% of retailers will have special promotions on that day, known unofficially as "Cyber Monday," up from 72.2% a year ago. And nearly one-quarter of online retailers will offer free shipping.
• Leave Your Credit Cards at Home. Use your debit card or checkbook. That will stop you from spending money you don’t have. If you do put something on a credit card, make sure you pay off those gifts within three months so you’re not racking up huge interest charges.
• Be a Creative Gift Giver. Some of the best gifts come without a price tag. Whether it’s freshly baked cookies, a hand-knit hat or a coupon good for babysitting, a homemade gift costs little but means a lot. Sending e-cards saves stamps and time.
• Stick to a Theme. Decide in advance to buy one-type of gift for groups of people on your list – say your favorite new music CD for your friends or a video game for the kids. It’ll make shopping easier and help you stay on budget. Consider bulk buying for hostess gifts, like chocolates or mixed nuts.