How
about an early New Year’s resolution? Resolve not to increase
your debt this Christmas!
It
is a simple concept. Each of us should make a resolution that
we will not increase our debt for Christmas. Whatever we buy
for Christmas we pay for at least by January 2006. Talk about
a Christmas gift that keeps on giving (or at least doesn’t keep
on taking.)
America’s
Debt Mess
Consumer
debt as a percentage of personal disposable income continues to
bump along at historically high levels.
These
numbers are even more alarming when we consider mortgage debt
is not included in them. Regrettably many consumers have looked
at the recent frothy mortgage market as an opportunity to refinance
and effectively roll their credit card debt into their mortgage.
Not only does this effectively use the equity in their home for
everyday credit card purchases, like vacations — it also means
they will still be paying for that vacation 30 years from now.
If this refinancing activity were included in the graph above
the red line would be even higher.
At
the same time, Americans have increased their debt to historically
high levels we have run our savings to historically low levels.
In fact, recently the savings rate has been NEGATIVE!
This
is not a good situation; ever higher levels of debt, ever lower
levels of savings, and an aging population getting ever closer
to retirement with little but credit cards to retire on. And
while these graphs reflect national aggregates, there are real
people behind every one of these statistics. Many of them are
Mormons. A fair share of Mormons have
participated in these trends right along with everyone else in
the country.
If
your personal finances look anything like these charts with rising
debt and declining savings, this Christmas is a good time to reverse
the trend.
Why
not make a resolution not to buy anything for Christmas that you
can’t pay for with your current paycheck or Christmas savings?
We
All Know what Needs to be Done
- Budget, budget, budget.
Set an amount that can be spent. Make the budgets complete.
Set amounts for more than just gifts. Remember decorations,
entertaining, travel, cards — whatever is part of your holiday
tradition.
- Keep track.
Record your Christmas purchases and add them up frequently.
Compare to your budget.
- Extra discipline.
Credit cards are easy to use. They are also easy to abuse —
particularly at Christmas. Abuse is easy because it is so easy
to lose track and buy when you have nothing left in the budget.
Drawing out a predetermined amount of cash and using only the
cash for Christmas purchases is great discipline. When it is
gone it is gone. However, carrying large amounts of cash may
not be advisable. Checks can work. Still checks are not as
convenient as credit cards. A modern tool that can help is
the debit card. It looks and acts like a credit card. However,
it goes against your checking account just like a check. A
debit card works great, especially if you only put the amount
you have budgeted for Christmas in the account. It’s kind of
like a pre-paid calling card. When the minutes are gone you
quit talking. When the money is gone you quit buying. With
a debit card the threat of having your card rejected at the
checkout is a real incentive to stay within budget.
Already
too Late for an Early Resolution?
I
understand I may already be late with the suggestion of an early
resolution. I confess I am the stereotypical male who doesn’t
even begin thinking about Christmas until after the college bowl
game announcements (and several of them have been played.) My
wife is more organized. I actually started thinking about this
article when I realized she was essentially through with her Christmas
shopping (which means our Christmas shopping.) But if you’re
an early shopping household and you fear you may have broken your
early resolution before you even made it — you’re in luck. You
can always be an early returning household, too.
A
Special Time of Year
We
are once again nearing that magical season filled with love and
good cheer. We will be reminded of angels announcing the birth
of the Savior more than 2000 years ago, and wise men bringing
gifts from the east. We will hear inspiring stories of selfless
giving to those who are less fortunate. On the other hand, we
will almost universally decry the materialism of the season.
I believe all thoughtful Christians will agree that the King of
Kings, who was born to overcome the world, cannot be pleased that
we celebrate his sacred birth with such worldly indulgence. It
must truly make him sad that in the process of that indulgence,
so many increase their enslavement to debt.
P.S.
While budgeting for the season, be certain to budget for tithing
first and attend tithing settlement early. Somehow it may prove
to be the best help you can get in sticking to your early resolution.
