Friday, December 29

Paying For Christmas - The Credit Hangover

I'm hoping that most regular readers of my blog won't be the ones that end up with credit hangovers after the Christmas season. However, it is a very common occurrence.

So, just what is it that possesses us to spend every dollar we can get our hands on at this time of year? Is it the ridiculous volume of commercials? Is it the consumer guilt trip about making sure our children aren't the only ones without the most expensive junk on the market? How come so many of us get fooled year after year?

Personally, I don't really do Christmas. I'll go to family dinners here and there, happily spending time with family and friends, but only bringing a whopping card with me when I show up. Hey, nobody says you have to invite me over for dinner!

I don't really exchange gifts at all anymore. When I was unemployed a few years back I simply could not afford to. Since then I have been free. Free of the maniacal traffic and frantic drivers. Free of the wind, rain and snow while I am forced to go out in search of gadgets and junk. Free of the irksome crowds always managing to get in my way while I am shopping. Free of the buyers remorse that comes when I spend all my cash or eventually get the credit card bills.

As for the rest of you... perhaps it is time to get around to budgeting? You see, you need to get rid of that accumulated debt just as fast as you reasonably can. If you don't, it's like throwing money out the window. Why on Earth would you want to do that?

Budgeting is pretty simple really. It's more a matter of discipline than anything else. If you don't already have a budget, then start writing down your expenses. Put categories like rent, mortgage, food, credit payment, electricity, heating, phone, insurance, parking, car payments, and repairs in a colum. Put the corresponding costs beside them and add them up. If you haven't forgotten anything, you now have a budget that you can follow. Don't forget to add categories such as entertainment, clothing and so forth.

Now, if this is a new budget, spend the entire following month, perhaps January, comparing your real expenses to your budgeted expenses. You'll find that the $15 per week you spend on coffee and donuts will suddenly show up. You'll find that the raffle tickets and chocolate bars that you buy for your childrens school funding drives will suddenly show up. You find that parking tickets, dry cleaning, lawn mowing, snow shoveling and other minor items continually show up to suck money out of your pocket.

At some point one of two things will happen. You'll either adjust your budget to reality or you'll adjust reality to your budget. Usually they meet somewhere in the middle! Regardless, once your budget gets fairly accurate, you'll see that it highlights, in unfortunate detail, exactly where your money is going. While it can be sad to see, at least it is a powerful tool to help you make better decisions. At the very least it will point out the effect that your decisions have on your financial situation.

To wrap things up, look for things you can forgo, without ruining your credit rating, so that you'll have more money left over to pay off your credit cards. If you don't have credit card debt, then you can make additional payment on your car loan, mortgage or whatever else you might owe money on. Heck, if things are going the way they should, perhaps you can simply put more into your savings or investments. An example budgeting tactic might be to cut entertainment and miscellaneous expenses from $300 per month to $200 a month. Just don't make the mistake of cutting fun out of your life entirely, it is in fact a necessity.

Good luck!

NOTE: Included in this week's Festival of Frugality post.

Frugal Guy said...
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financial imbalance said...

Nice post. This year I reduced my hectic spending around Christmas and stuck to my plan of paying only cash for the few items that I did pick up. This was a excellent test for me as I have been known to be a free spender around this time of year in the past. I think society gets sucked into the commericalization of the holiday season and it is really sad, as families continue to engage in ever growing debt levels.

Anonymous said...

For some reason guys don't seem to feel the need to give things the way women do. Don't know why that is. :)

But don't worry, although Buddy and Princess were pretty much spoiled rotten between the grands, aunts, uncles and us, noone went into debt.

Frugal Guy said...

Jenn, there is that aspect to things isn't there? :p

Financial Imbalance, thanks for the kind words and good job on avoiding the crazy debt mania that goes on during the holidays!

pretty cheap jewelry said...

Handmade items are thoughtful and inexpensive. The trick is managing your time. I start in August and am done two weeks before Christmas.

For example: make themed wreaths (with REAL greenery), make soup/rice/bread mixes in a jar, fill decorated boxes with handmade soap.

More tips and ideas from the thrift store queen at