The pre-Christmas period is the peak time of the year for retail
sales, and many department and other stores depend on a
successful Christmas for their annual profits. There is another
side to that coin: the same period is also the peak time for
consumer spending. A surge in consumer spending often means a
jump in borrowing to support that spending in the stores.
Even people who might normally be very careful with their
finances, may feel some pressure to overspend at and before
Christmas. A combination of peer pressure, the desire to please
the children and other members of the family, and the sheer
desire to have a great Christmas, may tip the normally frugal
into being a bit careless with their spending.
An excess of borrowing can mean later problems for those
consumers who really do let their finances get out of hand, and
every year tens of thousands of people do. For many, the spectre
of debt hangs over their Christmas festivities and spoils the
party even before they have sat down and fully assessed the
damage caused by the pre-Christmas excesses.
Between Christmas and New Year is a good time for home
budgeting, looking ahead to the next year and plotting the best
route to make it a happy year. When it comes to your finances,
and debt in particular, then the last week of the year is a
particularly opportunity to plan, and set a home budget.
How To Budget For The Year Ahead
What you have spent over Christmas, whether on credit or out of
savings, is a matter of fact. What you already had in
outstanding credit and overdue credit, is also a matter of fact.
It is important to treat those facts as such, and keep a
detached view as you write down your current financial
situation. It is all to easy for personal finances to become
overbearing because of emotional pressure you may place on
yourself.
When planning your budget, start by making a list of all your
outstanding debts, who they are owed to, and how much you need
to budget each month to keep up with the payments. Always
remember that if you fall behind with payments, your financial
situation will deteriorate, as costs, penalties and interest
charges mount up. As you list your monthly credit payments, use
them as the starting point for your monthly outgoings. It is
also worthwhile keeping the list of actual amounts owing at the
start of the year, and then see if that figure can be reduced by
the end of the year. That way you can monitor progress, just as
a business would. You want to see your net assets going up, not
down, at the end of your budget period.
Next, list out your unavoidable and essential monthly payments
in order of importance, with any state and local government
payments, such as taxes, at the top. Then will come your
mortgage or rent, and other necessities such as electricity,
telephone, gas, food and household expenses.
At this stage, work out a sub-total of all the above items,
which will be your priority monthly payments. Now is a good time
to compare the total you already have with your net monthly
income. If they are in balance, then you can make your payments
each month, but not have any flexibility or cash for
non-essentials and luxuries.
Hopefully, though, you will have a surplus each month which you
can use for desirables and for savings to set aside for any
unexpected expenses.
You can then add to your monthly budget by listing those
desirables you want to spend money on and how much. You should
also aim to build in savings to your budget. Bear in mind all
the time that if you spend on consumables, your personal assets
go down. If you save, they go up.
If your spending has really gone over the top of your
capabilities to repay on time, then you need to use the budget
plan you have come up with as a starting point for seeking debt
counseling, or for consolidating some or all of your debts. The
important thing, though, whatever the outcome of your home
budget exercise, is to keep calm and detached. Discuss with your
partner and family all the steps you need to take to get your
home finances in order after an extravagant Christmas, and then
do your best to carry through your budget plan, preferably
setting aside savings along the way to prepare for an interest
free Christmas the following year.
About the author:
This
household budgeting article was written by Roy
Thomsitt, owner author of the Eliminate Credit Card Debt Now
website.