In my current role as New Hope’s life
coach, I meet with many clients who have financial assistance needs. Usually,
the debt for these clients is overwhelming and they face the loss of their
basic needs if something does not change rapidly.
Unfortunately, once a person finds
themselves in this level of financial crisis, desperate steps need to be made
in order to get one on the right path to freedom.
The Christmas season
is now upon us and many people will be caught up in the moment of impulse
buying. By January, one may be calling me to help them recover from unwise
choices being made in December. I write this article to address the steps one
needs to take now to prevent long term consequences that will affect you
throughout 2015.
The first step is to realistically look at
your money. Determine a reasonable budgeted amount that is not taking funds
from your basic needs, (like rent, electric and food). If you don’t have the
funds, then don’t spend what you don’t have.
Set Your Limits – Decide what you can
realistically afford this holiday season without causing yourself a lot of
stress and anxiety. If you haven’t set anything aside for
holiday shopping, you may need to use money from a different area of your
budget to cover these expenses. For example, if you have money set aside
for “fun money” to treat yourself or money set aside for dining out, you
could cut back in both of these areas and use the savings towards your
holiday spending bill. Remember, gifts don’t have to cost money.
This will be my first Christmas without my
dad. He passed away in August of this year. As I remember back to my best
Christmas memories they were the times we spent together. As a kid, my dad
would drive us all around through the neighborhood looking at the Christmas
lights, or the times spending Christmas Eve as family together. We would first
go to Chestnut Level’s candle light service and then return to mom and dad’s
house for homemade cookies and punch and conversation. Oh to hear my father’s
voice again! One cannot wrap up in sparkly paper the things that really mean
the most!
If
there’s one time of the year when people shop with their heart, not their head,
it’s the holiday season. Emotional spending during the holidays is often the
tipping point that pushes people over the edge financially, as common sense can
take a backseat during this time of the year.
The NFCC offers
the following five reminders of the long-term consequences of over-spending,
some of which can last far after the lights are taken down and the tinsel is
packed away.
- Paying
additional interest – Adding new debt to an
existing debt load, one which cannot be paid in full when the bill
arrives, equals paying a larger dollar amount of interest due to the
higher outstanding balance. Even worse, when a balance is carried over
from month-to-month on an account, interest is paid on the previous
months’ interest. People often boast of buying an item on sale, then pay
for it over time, thus wiping out any savings.
- Diminished
future borrowing power – An increased level of debt
decreases the amount of credit currently available, and could cause
lenders to decline applications for new lines of credit or loans. Since no
one knows what the future holds, not being in a position to tap into new
credit is something to guard against.
- Diminished
future buying power – Buying on credit is a
contractual agreement to pay the debt later, often with money that has yet
to be earned. Committing tomorrow’s money for today’s expenses could
compromise future spending.
- Lower
credit score – Excessive debt often leads
to paying late, skipping payments, and utilizing too high a percentage of
open credit, all of which could lower your credit score. Further, applying
for new lines of credit simply to save money on today’s purchase will not
only increase the temptation to spend, but will show as an inquiry on the
credit report, potentially lowering the score.
- Debt
interferes with life – Debt is a 24/7 problem,
distracts people from their job and home-life, interrupts sleep, and
potentially causes marital strife.
Consumers would
be well-served to take stock of their current debt obligations before adding to them. Continuing to
pay for holiday expenses well into the New Year doesn’t create the kind of
holiday memories anyone wants.
Final thought,
Christmas is a time to celebrate the birth of our Savior. Jesus was not born to
offer an excuse to be in financial bondage; He came offering the free gift of
salvation.
Wishing you a Merry and Debt-Free Christmas!
Connie Hanten, BCMCLC
New Hope Life Coach
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