Use Extra Caution The Week Before And After Christmas
Posted on December 21, 2007
Last January I wrote an article about giving gifts, not promises this Christmas. I cautioned about how the joy of holiday giving is quickly replaced by the pang of regret for many people when the bills start rolling in and the scramble begins to find the money to make all the payments. I questioned whether a gift purchased with borrowed money is really a gift or just a promise. Sure for the person who receives the purchase, it’s a gift, but for the one doing the giving, it’s a commitment of future income�a promise to pay later.
You are most vulnerable to excessive holiday spending during the week before and after Christmas. As the holiday gets closer and the wrapped presents begin to pile up, the urge to give more increases during the final week. As you look over the presents, remorse creeps in when you think others may be giving you more than you are giving them. The result is what I call guilt shopping. Just visit a store on Christmas Eve and watch the last minute purchases people make. Out pops the credit cards, the purchases are made with little thought about the cost and the purchasers resolve to deal with the payments later.
The phenomenon that occurs during the week after Christmas is different, but just as deadly to your finances. Once the shopping season passes, merchants offer special incentives to get rid of unsold merchandise. Items you wouldn’t buy before Christmas are suddenly offered at a fraction of the original price and the lure is irresistible. It’s easy to fall prey to the temptation and make purchases that you wouldn’t otherwise make. The deals are just too good to pass up. The problem is, many people have already spent everything they allotted for Christmas and have to go in debt to take advantage of the deeply discounted prices. It reminds me of the story of the spouse who came home bragging about how much money they saved at the big sale, but never bothered to mention how much it cost to get the savings.
Resisting the temptations that arise during the week before and after Christmas is an important part of prudent financial management. Even those who plan for their holiday spending and put aside money throughout the year to cover it are often caught off guard and overspend during this time. Like the rest of financial planning and management, it requires discipline, a characteristic that people who experience financial difficulty often lack.
Last January’s article was prompted by a conversation I had with a regular reader of my column in late 2006. This person had contacted me to see if I could offer some advice on how to get out of debt. A brief discussion revealed the firmly entrenched cycle of borrow, spend, borrow, spend in which so many people find themselves. My reader’s problem stemmed primarily from holiday spending. It would take all year to pay off the purchases from the previous year, just in time to start the process over again. It was taking a chunk of this year’s income to pay for gifts given to others the prior year. This person was surprised when I pointed out that the interest being paid throughout the year is a hidden increase in the price of the gifts.
I encouraged setting a limit for the coming year’s holiday spending and saving a portion of it each month so the money would be available to buy gifts this year without having to go in debt. I also pointed out the interest earned on the savings could be viewed as a discount on the purchases. That’s good advice for anyone, but it’s especially good for those who tend to run up credit card bills during the holidays. That’s why I say use extra caution the week before and after Christmas. It’s easy to let the emotions of the festive season cloud your better judgment and derail the best laid plans.
Here’s a tip! Get all your shopping done at least a week before Christmas and then take a solemn vow to stay out of the stores that last week. That will take care of one of the danger weeks. The week after Christmas, only go shopping for two reasons. One, you have discretionary funds to spend and won’t have to go in debt. Two, the items on sale are ones that you would normally buy at a later date and they are discounted more than enough to offset the interest you have to pay if you charge the purchases.
Big year-end sales are the result of merchants trying to unload inventory that didn’t sell before Christmas. This unsold inventory is their problem, not yours. However, if they can unload it on you, and you charge the purchases, then it becomes your problem. Smart shoppers plan ahead and hold back some cash to take advantage of the markdowns they know will come when the buying season ends. Not so smart shoppers buy, run up debts and then try to justify it by telling themselves they are saving money.
You can be a smart shopper and improve your finances during the coming year, or you can be a not so smart shopper and struggle to get the bills paid off in time to do it all over again next holiday season. The choice is yours!
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