Mr. Penny Pincher

Failing to plan is planning to fail. Hopefully you’ve heard this expression. Nothing could be more true than when you’re speaking about money. If you don’t tell your money what to do, it will do something else on your behalf, most often without you even realizing it.

This is the time of year when you will inevitably turn on the news and hear about the mountains of debt many Americans are faced with. The post Holiday debt story is one that’s been rolled out year after year. My question for most of us is, why?

I’ve spoken of this before, but there are of course those among us who are unable to afford the basic necessities of life. This is a sad reality and not a new concept as it relates to our country or this specific time in history. There are always those who have less and are unfortunately reliant on credit to supplement their income. These aren’t the people I’m focused on.

I’d like to focus on the shoppers that go into debt in order to make their family’s holiday more “magical” or to make sure their kids get “what they want.” I understand there is a societal pull to spend more and attempt to give your kids the gift they’ve been asking for. This makes complete sense and I’m not oblivious to it. What doesn’t make sense is buying that item or items on credit.

If you’re using a credit card to buy anything for your kids during the holidays, you simply shouldn’t buy it. The fact you have to make the purchase on credit and spread it out over several months or years proves you didn’t plan far enough in advance to buy the item in the first place.

For whatever reason, people are always quick to throw down their credit card and buy something, knowing full well they’ll owe the money for months down the road. Not only will they owe the amount for the purchased item but they’ll owe the bank the interest for the pleasure of doing business with them. You’re willing to borrow from the bank but not from yourself?

Let’s say your son or daughter wants a gift that’s going to cost $500. This is not a ridiculous notion given how much a PS2, American Girl doll with accessories or electric scooter costs these days.

Why not save up for the item throughout the year rather than putting it on a credit card? You’d be borrowing from yourself rather than bringing the bank into the equation. You’re spreading out the financial pain in small increments and removing any interest that would be owed using credit.

Consider this. The same $500 item would cost you $41 a month if you started socking away the money in January. Even if you had a 0% interest credit card (hard to come by these days but it’s possible), it would take you the exact same amount of time to pay off that $500 item. Add any interest on top of that and it will take you longer.

Remove the bank from the equation and your holiday will be way less stressful. Between the presents, food and other incidentals, you’re almost always going to spend more than you think. Saving a little bit throughout the year will help alleviate some of the post holiday sadness and provide a much more fulfilling financial future for you and your family as you enter the new year.

You’ll receive the greatest gift of all. Peace of mind.