Well, it is 2006 and while most Americans are still recovering from the turkey and relatives, the oversize credit card bills are just starting to roll in. If you are one of those typical Americans whose desire to give to their children, family, and friends was bigger than your wallet, what do you do now? Here are a few tips for recovery and for better planning next years holiday spending binge.
Caveat Emptor. This is the familiar Latin phrase, “Buyer Beware.” This is especially true if you have financed what you purchased. Many retailers provide tempting financing options during the holiday season such as no payment/no interest for six months. If you did not do so when you made the purchases, review carefully the agreements for this type of financing. Make sure you understand any conditions that may cause your account to move into an interest-bearing situation. Some no interest offers may require a small minimum payment monthly that if late by even a day can kick you into a high interest assessment. Furthermore, some of these offers will reinstate accrued interest for the “no interest” period if the balance is not paid off within the time period. Finally, be aware that future financing with the same entity may result in a less than beneficial application of payments. Rest assured, your payment will be applied to the part of your balance that maximizes the interest charged by the credit issuer.
Pay with Passion. Make sure you attack your new debt aggressively. Typically, one should choose the debt with the smallest balance and pay it off first. This frees up more money to be put on the next debt. This technique called a debt stack provides a systematic approach to debt reduction while boosting your confidence through visible accomplishment. Yes, for you analyticals, it could save you money “in theory” to pay off the highest interest rate items first, but the benefit is usually negligible. Plus, in real life the emotional impact of visible accomplishment usually causes the debt stack approach to be superior because of higher levels of ongoing commitment. One exception to the debt stack approach is if you have any “Cash Advance” or “Check Advance” loans. The effective interest of these loans often at 50% – 5000% APR necessitate their elimination first!
Budget! This year budget for your holiday expenses. Begin to put back money for holiday purchases as soon as possible and don’t spend more than you have allotted. Or, better yet, purchase gifts throughout the year. If you see the perfect gift, pick it up, wrap it, and put it back for the Holidays. Use self-control! If you have debt, you should be focused on debt elimination not giving away what you can’t afford in the first place.
Give from the Heart. If you can’t afford much, give gifts from the heart. There have been many years that my wife and I gave each other a smile and a handmade card for Christmas. I cherish some of those cards as my greatest possessions.
Be Creative. Have you ever given your young child a new toy, only to find her playing with the box it came in? Children appreciate and often enjoy creative gifts. It doesn’t always have to be the latest and greatest. An age appropriate “personal coupon” book from you can be a big hit. Make a coupon book from you with different coupons such as a stay up an hour late coupon, a double allowance coupon, or a get out of grounding free coupon.
Teach Your Children Appreciation and Understanding. I realize the Holiday season is a time of year for the dreams of young people to come true, and as a loving parent, I’m sure you’d like to give your child or children their hearts every desire. But, even if you could, you probably shouldn’t! Two of the greatest gifts you can give your children are appreciation and understanding. Children should appreciate what they already have and what you are truly able to give regardless of how little or much it is. Furthermore, children should understand that life is not a fast food restaurant where you “order what you want and get it in minutes.” If you can teach your children appreciation and understanding, you have just provided them blessings even the wealthiest families can’t buy!