There’s an obnoxious song on the radio right now that mentions the “five months of bills” that remain once the holidays have come and gone. Though the song is obnoxious, the point is not—it’s true. Many people survive the expense of the holidays—the gifts, the travels, the parties and the wine—by relying on their credit cards. This is a bad idea for a number of reasons.
The first and obvious reason, is because you will need to pay (ever higher levels of) interest on the money you “borrow” to buy that present or bottle of wine. Long after the sweater has shrunk, and the wine has been drunk, you will still be writing checks to MasterCard.
Additionally, the 2009 holidays present a new challenge in terms of interest, and interest rates. New statutory changes reigning in credit card companies are set to go into effect on February 1, 2010. In anticipation of those changes, and the limitations that come with them, many credit card companies are sending out notices to borrowers advising them that their interest rates will skyrocket unless the borrower “opts-out” or essentially stops using the card, closes the account, and pays off the balance. While everyone should be opting out, and paying off the debt, if you miss the opt-out deadline, you may be paying for that sweater at an interest rate far higher than you may have anticipated.
Another point to keep in mind is, if you are even considering filing bankruptcy, and using your credit cards to get through the holiday season, depending on the timing of your filing, your creditors may have the right to challenge your right to a bankruptcy discharge. Running up cards in anticipation of filing is never, ever a good idea, and can pose problems for you later.
So how is one to survive the holidays without a credit card?
Cash and carry. If you don’t have it, don’t spend it. Just say no to extravagant gifts, or buying a gift for every family member. Instead, pull names and buy for just one person. Make home-made cookies as gifts. Cook at home instead of going out for meals.
Your small children or grandchildren do not know whether you have spent $30 on their present, or $300. And for older children, this is an opportunity to teach the life lesson of focusing on the spirit of the season, rather than the material value of their gifts.
And as for family and friends, just tell them you are doing something different this year. Right now it’s pretty hip to be frugal, so stay trendy, and tell them you are focusing on the meaning of the season, not the money.
Plan for next year now, and set up a holiday savings club with your local bank. Just $20 per week means you will receive a check for $1,040 in the mail next year, which you can ear-mark especially for your holiday spending. Avoiding “five months of bills” is possible; it just takes a little sacrifice and planning.
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