Christmas Credit and Personal Finance
I think for me saying some cliché like: It’s that time of year again, is pointless. Just take a look around and you can see, Christmas is here. It seems like the day right after Remembrance Day (and even Halloween) stores are erecting massive displays for the biggest buying season, at least on this content. The issue becomes dealing with the personal finance issues in January. Christmas credit is becoming more and more of an issue. Maybe there is some toxin in the air that causes the masses to buy without regard for the short and longer term credit ramification. Maybe we all have this backwards?
In Canada and the U.S. the borrowing culture is very similar: buy now and worry about paying for it later. This works great where consumer credit is so important in driving the economy. That’s right it helps move the overall economy but what about the “little guy” who isn’t making big money? Where the norm is just scraping by, and helping one’s own children with post-secondary education is nothing more than a “pipe dream” this personal finance strategy can really stack the deck against you. Think about it, revolving credit is often used for this and that type of credit has almost always a “demand” clause in the small print. This means that the lending institution can “call” the repayment of that money any time they choose. How many people would be ready to pay back everything they own on their credit card or line of credit?
It is interesting to note that in other cultures, they handle credit is a very different way. In Italy, they will often avoid buying anything on credit and this is taken to the very extreme. In the U.S. and Canada, borrowers will not hesitate in borrowing to buy a home. In Italy it is common practice for a couple to live with their parents and work to save enough to buy a piece of land. Once that goal has been attained, the couple works to save enough to build a foundation, basically building a home one piece at a time until it is finished.
What if North American borrowers followed the same pattern to they purchasing? Work to save the money for a car, buy the car and continue to “make car payments” into an account as in 5 years from now they can buy another car in cash instead of using credit? If we bit the bullet could we not make small payments all year for Christmas shopping fund? These payments would be made after the fact in January to pay for past Christmas shopping, why not save the interest expense by being proactive? Sure we would have to “bit the bullet” at first to make the transition, but would it not be worth it?
Unfortunately, in this “instant gratification” society we live in, this is a lofty goal. Being proactive to set up a shopping fund to avoid the Christmas credit problem could be a useful first step to help all of us reduce the frequency and total amount of credit we use/have in our lives. Credit can be a powerful leverage tool in personal finance, but has become a slippery slope for many; maybe it is time for a change?
Popularity: 1%
If you enjoyed this post, please consider to leave a comment or subscribe to the feed and get future articles delivered to your feed reader.
