Merry Christmas

Merry Christmas

Yes, it’s June – But Merry Christmas!

George Boelcke FCI
June 18, 2007
Yes, I know it’s a little weird to be wishing you a merry Christmas in the middle of the year. It’s just that for the average person, right now is about when we have last years’ Christmas bills paid off.
Studies over the years have shown that we tend to be wildly optimistic in thinking our Christmas bills will be paid off in a couple of months. Yet, in actual fact, it takes more like six months. Never mind the fact that we consistently underestimate and lowball what we’re really spending during the Christmas season.
Yes, it’s depressing to think about that. But knowledge really is power – so the more we do think about our behavior with money and our attitude towards debt – the more informed we’ll be. And likely – the less broke we’ll be.
Why does it take so long? Because we don’t have the money set aside for Christmas – or any big bill for that matter. So the only way we can pay for our December debt is on top of all our other regular monthly payments that aren’t going away. Maybe $2,000 out of that $5,000 credit card balance was charged in December, but that means for every $200 we pay on the card, $85 comes out for interest and only $46 goes towards that Christmas debt portion (40% in this example).
Can you turn things around by putting aside a couple hundred dollars each month, right now? You bet! Will you do it? That’s up to you. But if you don’t, the debt cycle will continue for at least two more years. One year to pay it off - and another year to save something.
It’s exactly the same as for all those annual bills we chose to ignore in our monthly budget or spending. We’re financially backwards and unprepared when they arrive. But please don’t claim that these bills are a surprise – they’re not – you knew they were coming.
So what do we do? Pay them from a credit card or line of credit, and they’re around running up interest for a year or longer. Even something like a $1,200 car insurance bill would take a one-time adjustment of saving $100 a month for it proactively. Or the alternative might cost more than triple when it’s paid on our credit card. That’ll take more than a decade, during which you’ll also have 10 more insurance premiums, on top of what you still owe, to make things much worse and not better.
After all, how far you still have to go to reach your financial goals is nothing when compared to the discipline it takes to make those first few steps. Setting aside some money pro-actively towards your annual bills, or a big event such as Christmas, is one of the biggest steps to reaching financial and debt freedom.