The Christmas Debt Trap: Are you caught in it?



Christmas isn't exactly a time of year we associate with saving money in our everyday lives, is it? But should it really be the spend-a-thon that it is during times of recession?

Sure, the high street and online retailers might be relying on Christmas for a boost to their takings
--and for those who manage to garner part-time seasonal work, Christmas is surely a boon. It also helps to bolster our faltering economies, at least in the short-term, as we spend money like mad, buying presents and gifts for loved ones, friends and family. But where is the "extra" money coming from. Adopt a strategy to deal with Christmas spending is my advice, according to your
circumstances.

In years gone by, people used to go without stuff for 10 or 11 months of the year, often saving small amounts in a jar (the ol' cookie jar!), in with freidns in a "Christmas Club", or just simply putting
a little aside each week to cover the extra expense of Christmas.

These days, well, things are different, and the way of it seems to be "shove it on the credit card--lets eat, drink and be merry for now, and worry about it later". This is FINE, so long as you have a great credit card deal (0% is good!) and you know you can easily pay it back later.

Our advice is: watch for the danger signs! As always, if you are borrowing money with no hope of paying it back quickly and easily, this can be the biggest danger sign of all.
Avoiding the Christmas Debt Trap by Planning Ahead

Simply plan for Christmas -- after all, it comes at the same time each year! Rather than getting to December and having to borrow money, you could be in a position, next year, where you have saved enough NOT for it to be a worry next time!

Looking at the <bad> ways to borrow money for Christmas, some of which I have highlighted above, its not diffiicult to see just why they are bad. Some, like the overdraft facility I mentioned, may carry a fee AS WELL as a high interest rate! Typically, also, loans secured on your property are at a high interest rate also, and are therefore expensive to pay back.

General advice and tips for your spending at Christmas:

In order to keep a grip on our finances, especially at this time of "plenty" -- we really do have to be realistic. This doesn't mean feeling hungry and sitting in an unheated home, however. But what I do advocate is that a careful planning and budgeting strategy be applied to Christmas.

I'll finish this article with a set of points -- can you apply them to your Christmas spending habits to avoid the Christmas debt trap?

Advice Check:Here are some  good ways to borrow money, if you need to for Christmas:

  • From family or close friends -- a  "soft loan", as its called, carries no interest, and can be arranged personally
  • IF you have a good credit rating, and are simply waiting for money you KNOW will arrive, a short 0% credit card on purchases deal may be good.
  • Dont borrow money at all -- avoid the Christmas debt trap next year by heeding the actions of our elders -- save up i n the year!

And here are the worst ways to borrow money just to get you through Christmas (I will expound below)
  • A loan secured on your property
  • Any short term bank loan
  • Any bank overdraft facility - especially if you didn't arrange it in advance!
My Top Tips for Making Christmas More Affordable

  • Set a budget for your gift-buying, and stick to it!

It's all to easy, I know, to buy, buy, buy at Christmas time. After all,, we want our family and our close friends to enjoy themselves, don't we?
However, setting a reasonable limit on expense per person, or per family group is really actually quite sensible. You worry, don't you, that you will be seen to be a total skinflint if someone buys you a multi hundred dollar gift and you buy them a hankerchief!
The answer to this potential issue is to  talk it over with the people you will be exchanging gifts with well before the season, and agreeing a sensible value of gift.
You will almost certainly find that they will thank you for it -- its not just you that's wanting to rein in the cost of Christmas!

  • Only buy on credit if you are certain you have a good chance of paying it back easily and quickly

I mentioned this above, and, if you are borrowing for Christmas because you really can't afford it, this is one of the danger signals. The danger is that you will still
be paying for this Chrsitmas, next December!. If you can't get a 0% credit deal just as a short term bridge, and your repayment amount is in the 10s of percent, a "credit card Christmas" could end up costing you double what you thought it would!

  • Remember Christmas is a short period, and the rest of the year is long!

If  the thought of not buying the presents you would like this year doesn't sit well with you, and you are struggling financially at the moment, then finally remember that if you do overspend, yes, you will see the pleasure of giving this Christmas, courtesy of spending the rest of the year having to find the payments for your repayment vehicle, and that may be tough! Self-discipline is the order of the day this Christmas!

Don't get trapped by the Christmas frenzy of spend, spend, spend this year. Use this guide to think wisely about your money this  season.
More ways to avoid overspending this Christmas
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