Things are looking up,statistically, when it comes to paying off Christmas debt. Most consumers think they can pay off Christmas debt in five months, when in reality it could take up to two years. There is an upside, today, the average consumer is managing to pay off their Christmas debt before the next holiday season. The down side: consumers are entering into a cycle of what I call ‘debt row. ’ Although they are paying off their seasonal debt…the cycle begins all over again with the next holiday season. I call this Debt Row.
How to determine if you are on debt row: for starters, the fact that you are borrowing to pay for Christmas is the first indication that you are on debt row or headed for it. If you are borrowing to pay for gifts, chances are, Christmas is not the only time that you borrow to ‘make it through.’ And remember, you still have to contend with those pre-holiday bills, these bills cannot be overlooked.
Make sure December bills are paid.
Make sure your December bills are paid before you purchase any gifts. If you are one of those consumers whose mindset is to pay December’s bills with the January bills; change your mindset. It is time that we, as consumers change our thought process when it comes to our bill paying habits. No more saying, “those people will get their money.”
Another indication that you are on debt row: you pay the minimum monthly amount on your credit card(s). An another indication that you are on debt row is your credit card is maxed out. You may not have a lot of money to purchase Christmas gifts if you pay your bills first, but that is alright.
Many people opt to purchase gifts instead of paying bills first. You must change your thought process. Paying your bills first is a must. There is no way around it, if you eventually want to be debt free. It is a wonderful feeling entering the New Year without added debt. Try it and let that be your Christmas gift to yourself.
Why is it difficult to pay Christmas bills in a timely manner? Interests rate are higher. Check your monthly billing statement, you are most likely paying 15%. Most consumers do not bother to get a lower interest rate. For every six months that you pay your credit card bill on time, you can request a lower interest rate.
Where do consumers get the money to purchase during the holidays?
- 52% use credit cards
- 30% use store credit cards
- 8% use personal loans
- 6% use payday loans
- 4% use home equity loans
We have become consumers who are willing to go into debt for our children. Electronic games, iPads, cell phones,$200 footwear, you name it. A new concept would be to let your child/children’s school grades dictate how much and what is under the Christmas tree. One low grade equals one less gift. Junior and the princess will get over it. Earning gifts will actually give your children a sense of accomplishment. Parents, it is time educate our children on the importance of spending and saving for the future.
Can you remember the gifts you received last year? Can your children remember the gifts that they received last year? If not, this is an excellent time to change to a different, gift giving strategy.
Between gift giving, hosting holiday parties and for some, fewer work hours, it’s easy for debt to add up if you don’t have savings on hand. During the Thanksgiving and Christmas holidays we also have to contend with purchasing more groceries than normal. Holiday grocery spending can add an additional $300 – $600 to our food bill. 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 $350.00.
Keep in mind that a Christmas Club account can help defray the cost of grocery items as well as gifts. Be smart as well as proactive; open a Christmas Club account for next year.
We all love the supermarkets where we can get free food samples as we shop. These promotions are plentiful this time of year, we pay for those promotions one way or another. All those advertisements, we pay for those too. Try shopping for your food at some of the discount grocery stores: Price Rite and Aldi’s, etc.
I understand that it is easy to get caught up in the holiday merriment. Advertisers are enticing us on television, on the radio, billboards, everywhere. The malls are decorated beautifully, all to get us to spend, spend, spend. Merchants invest big bucks to get our dollars. When the New Year arrives and you miss a payment, those same merchants (who pulled out all of the stops to get you to purchase from them) start calling you at home and on the job, asking when they can expect payment. Did you know they like it when you miss a payment? Yes, that is how they make a good portion of their money.
Because you missed a payment, they can raise your interest rate, charge you over the limit fees, etc. They don’t really want your monthly payment to come in a timely manner. If you pay your bills on time, merchants and retailers benefit, but not as much as when you miss a payment or pay late. Keep that in mind when you think you want to spend money you do not have during this festive time of year.
It is time for consumers everywhereto get off the debt roller coaster. Although this holiday season mayentice you to spend more than you can afford, discipline is the key to helpingyou manage your purchases. Do not get taken in by those 60% off deals or those‘no interest until 2019’ deals. Read the fine print, do the math and calculateif it is truly a bargain.
Do not be tempted by liquidation sales that pop up this time of year. Liquidators are in business to make money, they are not giving you a deal, and liquidating is what they do. They come into the area, rent a temporary location and move on before you realize the item you purchased is not performing to the excellent standards that their advertisements proclaimed. Do not be fooled. That flat screen television that you purchased at the liquidation sale for $499.00, you could have purchased it at Walmart for $99 on Black Friday. You would have received a warranty from Walmart. Liquidators do not accept returns nor do they give warranties. And their 800 number is no longer a working number.
Make yourself a Christmas shopping list. Santa checks his list twice – go Santa one better and check your list three times. Do you really want to buy gifts for everyone on your list? Splurge on a greeting card instead. Trust me, you will get over the commercialism hype of the season and reality will set in on December 26th.
Creativity is the key in gift giving this year. Affordable gift giving, it can be done, get creative in your thinking. We all have pictures that are dear to us and to those we know and love. Clean the dust off those sentimental pictures, give them new life. Now, go to your local dollar store and purchase a nice silver or gold picture frame.
It truly is not the amount of the gift that counts; it is the thought that will touch hearts. Thrift stores sell silk neckties for 99 cents, you can have the necktie dry cleaned for approximately $3. The recipient of your gift will not know how much you spent unless you tell them. When shopping at the thrift stores stick with items that are 50% off. You could very well purchase a Jones NY or Anne Klein suit for $7.99. Note to the men: I purchased a Michael Kors satin dress and jacket a few years ago. It was 50% off, my cost, a whopping $5. Designer items can be found at your local thrift shop.
Nowadays you need a part time job to be able to purchase gift wrapping; everything has gone up in price and there is no end in sight. Creative gift wrapping is the answer. We all have items in our closet that no longer fit. That old outdated linen or silk dress or that 2 sizes too small suit will make elegant wrapping cloth for your creative gift. A bow from the dollar store and you are good to go. If you search, savings can be found everywhere.
An appointment at a hair salon or barber shop makes a nice, affordable gift for the niece or nephew on your list. An oil change or car tune up gift certificate for an elderly aunt or uncle (on a fixed income) is economical and appreciated. A pedicure makes a nice, relaxing gift for your parents.
For gifts that may cost more, consider partnering with a sibling or a friend to make the purchase more affordable. Examples for this type of gift giving would be fruit baskets, cheese and sausage baskets, etc. Restaurant gift certificates would make a nice holiday treat for someone on your list. Consider taking someone different to the office Christmas party and be sure to notice the smile on their face. A gift certificate for a massage for that hard working sibling of yours may garner you the ‘Best Sibling of the Year Award.’ Many of the gift ideas that I’ve mentioned can be found on Living Social, Groupon or other similar websites for additional savings.
Lastly, keep in mind when you use your credit card, you are simply borrowing from your future income. If you use a credit card, remember they are for convenience, and should be paid off at the end of every month. When you use your debit card to purchase a Christmas gift or any item for that matter, ask yourself what bill will go unpaid as a result of that purchase. You know your finances better than anyone. Be honest, ask yourself the hard questions, such as, “Can I really afford this” and more importantly, “Why I am I buying?”
Break the cycle of spending money that you do not have. A sure fire way to know what should or should not be charged on a credit card: can the item be seen in two to three months? If not, you should pay cash for those items. Those items include, but are not limited to groceries, gas and fast food.
Remember, when shopping at any time of the year: ACT YOUR WAGE.Barbara Peterson is founder of Peterson Sewing School, co-owner of The Syracuse Seamstress, Partner at Syracuse Fashion Gallery, owner of Debt Row Freedom and Syracuse Spice Company. She is also certified by the FDIC to teach their Money Smart and Train the Trainer programs.