Staying Out of Debt this Christmas
By Richard P. Halverson

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.