Unless it's gingerbread, don't 'eat your house' this holiday shopping season.

In "Home Equity: What's Going Up, What's Going Down, and What To Do About It," a new report about the rise in home equity use, Needham, MA-based publisher, the TowerGroup, predicts increased use of home equity lines of credit first for 2005 seasonal purchases, then for hard-to-keep debt consolidation "resolutions" necessitated by over-spending, followed by income tax payments in the spring.

Taking bites out of your home equity to postpone paying cash for wants could become a financially risky triple whammy.

Even the National Retail Federation (NRF), whose members' annual profits rely upon the seasonal up tick in consumer spending, warns that the year-end holidays are too often a prime season for financial peril.

NRF's 2005 Holiday Consumer Intentions and Actions Survey, forecasts consumers plan to spend an average $740 this holiday season, up 5.1 percent from last year.

Unfortunately, for many, home price appreciation that has become home equity wealth is how they manage to keep up with ever-higher levels of holiday spending, says the TowerGroup.

Home equity is the difference between your mortgage balance and the value of your home, not collateral for frivolous expenditures.

Any loan tied to your home's equity is, by nature, an equity-depleting loan. The best use of equity money, the experts say, is for capital improvements and investments that provide an equal or better return on your money than the cost of the loan.

Home improvements, education for the kids and new business financing are relatively better uses of equity and much better gifts, than buying under-the-tree presents, holiday parties and unplanned winter wonderland vacations.

Debt consolidation and emergency nest eggs can be other wise uses, provided those uses don't become habitual.

Saving for the holidays and the season beyond is always a much better financial approach.

"It's essential to get out-of-control finances on track before hitting malls and Main Street," says Claire Parins, legal content editor for Socrates.com a website for consumers seeking money-saving solutions.

Creating a holiday budget plan with a holiday savings-spending account is crucial not only for the season of joy but also throughout the year.

"If consumers don't consider their financial position and set aside post-holiday money for bills, they could find themselves in trouble -- trouble that may entail bankruptcy. With the recent enactment of new bankruptcy laws, consumers will find resolving financial difficulties more troublesome," she added.

To create the budget, Socrates.com suggests:

• List your monthly living costs, including essentials like house or rent payments, food, clothing, health care costs, transportation to work and utilities. Tally these necessary living expenditures help estimate how much discretionary spending -- if any -- you actually have.

• Prioritize. Shelter -- rented or owned -- is your primary and foremost cost. If extra debt burdens your ability to pay the rent, your mortgage or other necessities, accept that you can't afford the extra burden.

• If you have the discretionary cash, create a gift list that cuts back on gifts for "social" friends and acquaintances. Give a card or be creative and give home made individualized gifts.

• In the spirit of the holidays make donations to housing operations for the needy in honor of your family or friends instead of individual gifts.

It's the thought that counts.

So does hanging onto your home.

Published: November 30, 2005

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A journalist for 35-years, Broderick Perkins parlayed an old-school daily newspaper career into a digital news service offering editorial content and consulting services. Perkins' San Jose, CA-based DeadlineNews Group includes the flagship news site, DeadlineNews.Com, offering real estate, personal finance and consumer journalism, and a backshop, the Deadline Newsroom.