LOUISE FAIRSAVE: Holiday debt avoided
Research shows that people associate positive feelings with having lots of money and with spending without restraint. Indeed, they see restraints and limitations as negative.
So in pursing happiness during the holidays, we would normally spend freely in order to make our family, friends and ourselves happy and merry. Unfortunately, after the holidays, the debt bells start ringing in earnest.
As we move further and further into January, we more squarely face the consequences of any extra spending for the holidays. Like a worn-out swimmer trying to keep his head above water, we try to survive until that long awaited payday during January.
This January seems different, though. Most people curbed the seasonal spending, spending a quieter Christmas. Bonuses trended smaller or nonexistent. Personal spending was also dampened by the predictions of economic doom and gloom ahead.
Yet we all had a happy holiday season, didn’t we? Can this experience help us better face a financially trying 2012 year?
How can we all fully exploit the joys of life without compromising our finances for the rest of the year? How can we give joy to our loved ones without destroying our long-term peace of mind?
Well, there is no simple solution that will suit everyone. Each of us has to evaluate his or her weak areas.
Do we go overboard on preparing the house, on food and drink/entertaining, on clothing and/or on gifts? Are we impulsive shoppers or ones who just cannot resist credit? Do we plan for handling our money, for our financial future, for happiness today and tomorrow?
Every effort should be made to really examine and evaluate our behaviour and adjust it for what we truly desire in the long term. Here are four pointers:
• Earn extra, save extra: let’s change our mantra from “spend extra” to “save extra”.
• Budget, budget, budget: it comes down to having a budget and staying as close to it as we can. No one expects perfection but having a plan for earning, spending and saving will help motivate us all to keep on track. If you have never budgeted before, just start.
• Limit credit card use: let’s use our credit card as a convenience, not a debt builder – only charge costs that we’re sure we can settle in full when the bill is received. If we are weak in maintaining this point, it may be better just to cut and throw away all credit cards for our own benefit.
• Plan our finances: if we have our prepared budget, we should be in a good position to project accurately how we will handle debt. For example, it would make sense to take low- or no-interest short-term loans where indicated in our planning. For example, some relatives, friends, or employers may provide no-interest loans for a few months.
For these types of loans, it is important to repay on schedule or we may eliminate the possibility of future loans from the same source. A personal financial plan and monthly budget help us to set out our hopes and dreams. It offers an opportunity to build in better balance as we live from day to day, year to year.
The 2011 holiday season reflects our willingness to change: we can be happy without excessive spending. Also, with time and thought, we can avoid unnecessary debt and manage whatever debt we undertake wisely.