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 Happy Down-Sized Holiday

Published: Friday, 20 Nov 2009 | 1:57 PM ET

By: Chris Taylor, Special to CNBC.com

If you thought last year was tough, brace yourself for this holiday season. The stock market may be up, but more than 7 million jobs have been lost in the last two years, and unemployment has climbed to a 25-year high.

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For American families, that means a scaled-back holiday of fewer gifts, less expense, and ramped-down celebrations. In fact according to a new poll by the National Retail Federation, more than 84 percent of people plan to clamp down on their wallets and spend less on gift-giving than last year. And when you think about it, that’s not such a bad thing.

“Remember that you’re not the only one concerned with saving money this holiday season,” says Farnoosh Torabi, author of the personal-finance guide You’re So Money and money coach on SOAPnet’s Bank of Mom and Dad. “Our ‘new normal’ economy embraces the less-is-more mentality — and so should you. There’s no shame in saving money.”

After all, if you’re already out of work or just scared about losing your job, financial necessity has a way of focusing the mind. A new poll predicts we will spend about as much on gifts this holiday season, $638, as last year — which was smack in the middle of the financial meltdown, and “one of the worst holiday seasons in recent memory,” according to Gallup.

To be sure, it can feel embarrassing not to be able to buy your kid the latest Xbox game he’s been asking for. But just as the stock market corrected from unsustainable highs, so household budgets have corrected — and that’s a positive development. What this holiday may lack in quantity of presents, you can make up for with quality time like tree-trimming parties or family movie marathons.

“It’s not only okay to cut back, it’s a great opportunity to talk about values,” says Szifra Birke, a psychologist and wealth counselor in Chelmsford, Mass. “If you’re extravagant when it doesn’t make sense, and then become upset and stressed about money, what lessons are you passing on to your children?”

Just because your budget is constrained, in fact, doesn’t mean you can’t have a memorable holiday season. It just means planning ahead, shifting priorities, and getting creative about where and when you spend your dollars. A few key tips from the personal-finance experts:

• Turn points into presents. You may not even know how many award points you’ve racked up on your credit card, but those are easily translatable into merchandise or gift certificates.
• Wrap up your skills. Instead of spending dollars, spend your time, advises Torabi. Web developers can build a site for a friend or loved one, would-be chefs can cook a meal, and amateur photographers can take family portraits.
• Regift — carefully. Not with cheap knickknacks, but items with real sentimental meaning. If you have a favorite book, for example, give it to a good friend with a personal note about how it changed your life.
• Sweet charity. If you were going to give a little cash to charity this year, do it in a loved one’s name — and enjoy the nifty tax deduction yourself, which will come in handy on April 15.
• Work the Web. Anything you want to buy, make sure you comparison shop on the Internet before you whip out that credit card. Sites like PriceGrabber.com, NexTag.com and RetailMeNot.com will help. And don't forget the importance of free shipping deals, or entering coupon codes for extra discounts.
• Bid cheap. On auction sites like eBay, scope around for goods that are listed as unopened or ‘NWT’ (new with tags). You’ll get the same stuff at a fraction of the price.

In short, this year’s holidays may not be as lavish as when housing was booming, credit flowed freely, and the Dow was soaring to record highs. But by trimming the excesses and returning to the basics of faith and family, the holidays can turn into something far more meaningful.

“Make conscious choices about where and how to spend your money this year,” advises Birke. “Give smaller presents, or give to charity. After all, handing down values is much harder than handing out presents.”

©2009 CNBC.com