‘Twas The Nightmare after Christmas: Holiday Debt

Did you know it takes the average consumer a little more than two years to pay off debt that they incurred during the Christmas holiday? And that’s only Christmas debt. What about the bills incurred before the holiday season began? There has to be a way out of this vicious spending frenzy that occurs every December. So, before your go out and spend money that you don’t have, here are a few pre-holiday tips.

For starters pay your December bills before you purchase any gifts. If you’re one of those consumers whose mindset is to pay December’s bills with the January bills, we are talking to you. It’s time that we as consumers change our thought process when it comes to bill-paying. We know you may not have a lot of money to purchase gifts if you pay your bills first. Do not panic, this indicates that you are not in control of your finances. Not to worry, all is not lost. You can be in control of your finances, and you can start by paying your December 2013 bills when they’re due. It’s that simple. It makes no sense trying to keep up with Joneses. They’re probably in more debt than you are!

Secondly, whatever happened to the days when fathers said, “I’m the big cheese around here, and what I say, goes? And whatever happened to the mothers who used to say, “Because I said so”? Let’s bring those fathers and mothers back and teach our children a thing or two about spending. We’ve become parents who go deeply into debt for children who’re bringing home mediocre grades. And these are the kids with a gazillion gifts under the tree. What is wrong with this picture?

Can you remember the gifts that you received last year? Can your children remember the gifts that they received last year? If so, where are the gifts from last year? In the back of the closet? And more importantly, are you still paying down Christmas debt from the previous year? If you are, we are talking to you. Starting in January (December, if you are smart) get yourself a Christmas Club account for next year. During the Thanksgiving and Christmas holidays we also purchase more groceries. Holiday grocery spending can add an additional $400 to $600 to our budgets. Let’s not forget the all-seafood menu that many of us enjoy on New Year’s Day. That alone can set a budget back another $300. Your 2014 Christmas Club money can help with food as well as gifts. Be smart, start socking some cash into a Christmas Club account.

As consumers living in Syracuse, we also have to keep in mind that winter here brings other expenses such as higher-than-normal heating bills. If you charged Christmas on your credit cards, not only will those holiday bills be due in January, so will your gas and electric bill. Do not be fooled into thinking that your utilities cannot be shut off in the winter. The local utility company is required to give you a 72-hour notice (that is three business days) before they can shut your service off. The Public Service Commission requires the local gas/electric company to give 72-hour notices from Nov. 15 through April 15.

Having your utilities shut off during the winter months is a disaster. If there’s a chance that you may forego paying your electric bill to purchase a gift or two, it’s just not worth it.

Sure, it’s easy to get caught up in the holiday merriment. Advertisers entice us on television, on radio, billboards, every¬where. The malls are decorated beautifully all to get us to spend, spend, spend. Merchants invest big bucks to get your dollars. When the new year arrives and you miss a payment, those same merchants start calling you at home and on the job, asking when can they expect payment. Did you know they like it when you miss a payment? Yes, that is how they make their money. Because you missed a payment, they can raise your interest rate, charge you over-the-limit fees etc. That’s how they make their money. If you pay your bills on time, retailers benefit but not as much as when you miss a payment or pay late. Keep that in mind when you get sentimental over Christmas shopping.

We don’t want to sound like Scrooge, but it’s time for Syracuse to get off the debt roller-coaster. If sounding like Scrooge is going to help you, call us Scrooge and we will respond with a ‘Bah Humbug.’ To avoid spending more than you can afford this holiday, use discipline to manage your purchases. Do not get taken in by those 60-percent-off deals or those ‘no interest until 2016’ deals. Do not get tempted by liquidation sales. Liquidators are in business to make money, they are not giving you a deal, liquidating is what they do. Don’t be fooled. That flat screen television that you purchased at the liquidation sale for $1,199, you could have purchased it at BJ’s for $799. And BJ’s would have given you a warranty. Liquidators do not accept returns nor do they give warranties.

Make yourself a Christmas shopping list. Santa checks his list twice, so go Santa one better and check your list three times. Do you really want to buy gifts for everyone on your list? It’s alright if you want to splurge on everyone, but remember, you are feeling the hype of the season. Trust us, it will go away on Dec. 26.

Get creative in your gift-giving this year: take a picture of the person to whom you want to give a gift. Now purchase a nice silver picture frame at the Dollar Store. Then go to Macy’s for a gift box. Need we say more? Get unconventional. Does someone on your list love their car? Purchase a car-wash gift certificate for them. It truly is not the amount of the gift that counts. It’s the thought that counts.

Do you have a few women on your list? Forever 21 has beautiful multi-colored scarves for $10. Go back to Macy’s and get a few more boxes, throw a scarf in each box. No one has to know you spent $10 on them. Do you have a niece who would love a fancy hair style? Do you have a nephew who needs driving lessons or an elderly aunt or uncle who needs an oil change or a tune-up ? Gift certificates are always affordable and much-appreciated.

Lastly, remember that when you use your credit card you are simply borrowing from your future income. When you use your debit card to purchase a Christmas gift, ask yourself what bill will not get paid because of that purchase. You know your finances better that anyone else. Be honest with yourself. Can you really afford it?

It’s time to break the cycle of spending money that you know you don’t have.

James and Barbara Peterson are local financial experts. To schedule a seminar for your group, or business, call 446-4668,or email info@yourcreditworthiness.org. A version of this article originally ran in December 2008.