Post-Christmas Debt an Issue?

Not for our poll respondents, apparently.

As we begin the new year, there are still some lingering traces of the busy December holiday season, which for some may include credit payments.

Our December poll question asked: In order to keep up with the social expectations of the holiday season, is it reasonable to rely on credit cards or other loan services to defer the financial stress to the new year?

Of the 119 KBR voters, 89% said “no”.

Gay comments: “We should not allow social expectations drive us to purchase items we cannot afford, particularly as these gifts are often for non-essentials for the receiver.  Give what you can afford, give the gift of your time if you don’t have extra disposable income.”

D’Arcy adds: “With debt to income ratios at all-time highs and with banks encouraging more and more debt it is too easy to over spend and not be disciplined with credit cards. If need be, become the Grinch!”

Some KBR readers addressed that there are likely other factors other than meeting holiday expectations that lead to credit card spending. Greg opines: “Deferring financial responsibility to the future is not only bad planning but the evidence of other issues that must first be dealt with.”

From an advisory perspective, Maureen suggests: “It is easy to deem credit card over-spending as irresponsible, and many of those in debt who keep spending would agree, as irrational as this seems.  I believe in many cases there is stress and other psychological factors driving this behaviour that need to be dealt with. Like suggesting to someone with a weight challenge, “just eat less!”, it’s not that simple. The advisory role can make a huge difference by understanding this and helping the big spender find a satisfying balance between the joy of giving and the task of financial management.”

A few voters commented that use of credit during the holidays is not a bad thing if it is used smartly.

Deanna writes: “I enjoy the use of a credit card so that I do not have to carry around cash with me. When it comes to Christmas, I keep all of my receipts, add them up then pay the credit card off in full December 23 or 24, whichever. Then when my card does its usual monthly closure around the 26th I pay whatever other expenses I have made. Yes, I am a saver. I have already decided on the amount to spend and it is all saved prior to the time coming up.”

Lorri provides another option to consider: “I believe that credit cards have too high of interest on their cards and your payments are mostly eaten up by interest. If you have a line-of-credit with a very reasonable interest rate, this would be the better way to go.”

Finally, Cheryl makes the connection to the importance of financial literacy: “…We have to get back to basics and start to learn to live on cash as our parents did. By learning to budget and save for emergencies we can control our spending and debt loads. We need to start implementing this from day one in our curriculum in school and secondary education…Financial institutions are always going to make lending attractive and VERY EASY to do, we have to make the CONSEQUENCES of that impulse spending just as real for them. Education and support is the key.”

Thank you to all who voted and commented in December’s poll. This month’s poll question is "Should CRA reduce its number of tax auditors to meet budget cuts?" Tell us your thoughts!