Tuesday, December 21, 2010

Christmas Budget

Like most people, Christmas demands soon start to knock on your door and before you know it, the wallet becomes a revolving door. The introduction of Credit to our society now allows purchasing while removing some logical decision making. The cash in hand purchase method is substituted by credit limits which simply means the measure of affordability is the credit remaining on the credit card and not on the hard earned cash saved. The solution is a Christmas budget that details your Christmas list and the dollar value attached to each person your shopping for. The purpose is to avoid those last minute shopping urges to add icing on the cake gift to that special someone that could suddenly leave you hundreds of dollars in debt. In January the last thing anyone wants is to pry open their credit card statement and review pages of unnecessary purchases simply because of available credit. In a recent survey from ING direct, 71% of Canadians revealed they were using the savings this year for Holiday purchases, as opposed to adding debt. That's admirable however according to Equifax Canada; total outstanding credit card debt hit $78 billion in September 2009 -- up from $76 billion in September 2008. Canadian debt is growing at a rapid pace and in most cases at high rates of Interest.

So what to do, you might ask? Consider saving for Christmas 2011, and start a pre-authorized withdrawal from your bank account into a special account. Leading Edge Credit Union offers a SSC product that provides this simple savings option https://www.lecu.ca/Home/ProductsAndServices/YourMoney/Savings/YOURSavings/index.jsp . It also pays a premium interest rate on your deposit each month. In January, consider consolidating your credit card balances in a loan with a lower rate and a structured payment. This will allow you some comfort of knowing exactly when you will have this credit paid off. Pay particular attention now to credit card statements that indicate the time it will take for you to pay off your credit card debt. New legislation requires that all credit cards must disclose this information. A loan could cut your interest rate in half and ensure you pay off your debt in the shortest time frame saving you thousands of dollars in unnecessary interest. So in summary, plan, plan, plan and next year's Christmas will hopefully be less stress on you and your wallet.


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