Christmas spending can lead to New Year debt!
By VonDez Phipps
Reporter-SKNVibes.com
BASSETERRE, St. Kitts – WITH the Christmas countdown already in effect, many consumers are preparing to make their usual seasonal shopping and extravagant spending however financial pundits are warning against this pattern of behaviour.
An informal study carried out by this media house reveals that the average Christmas spender doles out approximately $1500 for goods during the season. From Christmas decorations, to new linen and curtains, to new paint jobs for the home and vehicle,
Christmas gifts, hosting parties or just hanging out during the Carnival season can all lead to consumers entering the New Year ‘without a dollar to their name’.
Another factor that can negatively affect one’s financial status is the traditional hire purchase for that new living room suite, bedroom set, refrigerator or stove at the end of each year. The average shopper spends upwards of $3000 for such items and with interest that sometimes plateaus at 20%, can end up being $3600 in debt.
Others resort to borrowing from financial institutions, often times borrowing much more than they initially needed, becoming saddled with a 5-year debt.
SKNVibes approached a potential consumer outside a popular furniture store and asked of her plans for Christmas.
“Well I have been visiting a set of chairs in here for a while now and since I just done pay off for the set I took out three year ago, I plan to take this new set home for Christmas,” she confessed.~~Adz:Right~~
When asked if the over $6000 (cost value before interest) could perhaps be put to better use in an account or fixed deposit earning approximately 5% interest per annum, she noted, “Well I want my front room to look stush when my family visit from overseas and my friends come by the house.”
SKNVibes spoke with the Manager of Personal Financial Services at Royal Bank of Canada, J. Dawn Heyliger who noted that many consumers typically spend large sums of money and run into great debt “all in the name of Christmas”.
Heyliger suggested that consumers begin to invest in more asset-based securities rather than purchasing consumer items which are bound to depreciate. She added though that if debt has to be incurred, it must be used on something that will appreciate and give great return on said investment.
“Consumers need to track their spending. Firstly, they must determine what it is that they are spending on and then remove some of those things in order to set yourselves some realistic financial goals. You need to stop spending money unnecessarily on things that you really don’t need but you just want. So you have to take stock and substitute the wants with needs.”
Heyliger promoted savings plans and availing oneself of investment opportunities, and encouraged individuals to set achievable short and long term financial goals.
“For this Christmas, every consumer must set themselves clear goals and establish where they want to be in the next year or two. It doesn’t make any sense going on vacation every couple of months or to get caught up in extravagant spending to buy name brand products or to decorate the house. Once you have those clearly defined goals, your focus should be on building savings to achieve those goals.”
Heyliger highlighted that the adaptation would take a great deal of self-discipline, especially if the consumer normally spends an exorbitant amount of money.
She compared the average consumer’s money management to the government where each department needs to look at where its leakages are and reduce them. She added that consumers should equally observe their savings and spending habits to pinpoint where exactly their finances are leaking and try to block those gaps.
“It is going to be tough for the first couple of months. It’s like an exercise programme, once you get into it, you’re going to keep at it because you enjoy your new body. In the same way, you are going to love seeing your finances grow and so, you would be encouraged to save even more.”
