5 Keys To Overcoming The Urge To Splurge
Christmas is for debt?
Christmas will soon be upon us with all of the good cheer, family get togethers and presents!
All of the big department stores are already in full-on Christmas mode, with aisles upon aisles of decorations in the front of the store and Christmas music pumping over the PA systems. It’s hard not to get into the Christmas spirit and spend, spend, spend!
Christmas time can be one of the most expensive times of the year, and a lot of people blow out their budgets trying to give each other a “nice Christmas”. In fact, a Consumer Reports poll found that many people are still paying for last year’s Christmas bills. if you do the math - that means approximately 12 million of us!:
Six percent of those surveyed are still paying off debt from last year’s gift purchases. If you do the math, that translates into approximately 12 million Americans who are in hock to credit-card companies for this reason alone.
This year, let’s try to be more responsible with our purchases, and think before we act and go into credit card debt. In fact budgeting for Christmas expenditures earlier in the year is the best way to go. Make it a line item in your budget!
5 keys to having power over your purchases
Dave Ramsey suggests that you work on developing a “power over purchase”, and make better buying decisions. You can do that by:
- Waiting overnight before making a purchase. We often get caught up in the emotion of the moment, picture ourselves using the purchase, and how much it would make our life better. Wait overnight and take some time to think about it.
- Carefully considering your buying motives. No amount of stuff equals contentment or fulfillment: A lot of times we buy things because we think it will make us look cool, or be a status symbol. In the end things just leave us feeling empty. Remember, you can buy fun, but you can’t buy happiness.
- Never buying anything you do not understand: Don’t ever buy something without first knowing exactly how it works, what it does, and how to use it. Don’t understand how that variable annuity works? Don’t buy it until you’ve researched it and understand how it works. Too many people waste money on things they don’t understand, and will never use.
- Considering the opportunity cost of your money: Remember, if you spend money on that new car, you may look cool driving around, but you’ll never make back that $25,000 you spent on the car - which you could have invested in a good mutual fund and been appreciating, instead of depreciating. There is an opportunity cost to everything you buy.
- Seeking the counsel of your spouse (or accountability partner): If you’re considering making a purchase, make sure to seek the counsel of your spouse or a trusted accountability partner. Often they can tell you when you’re making a rash decision, and convince you to forgo a purchase.
Remember, when you’re making buying decisions, especially for items over $200-300, it can be very easy to become emotionally involved, and make rash decisions. Studies have found that most people actually have physiological reactions to when they’re purchasing something over $300. Their heart rates speed up, they get sweat on their upper lip, they feel nervous, etc. Keeping the above tips in mind will help you to overcome those emotional reactions, and get on your way towards a debt free new year in 2009!
He who is impulsive exalts folly.– Proverbs 14:29 (NKJV)
What do you think about Christmas debt?
Have you ever ended up paying your Christmas debt until the following Christmas? Do you think budgeting for the expenses may have helped you to avoid going into credit card debt? Are you making different Christmas spending decisions this year, or do you feel that Christmas is just too important to cut back on the spending? Let us know what you think!
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Cartoon Funny Of The Week
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Unintended Consequences Of Doing A Budget
Doing a budget has decreased our spending
Within the past few months my wife and I have started doing a zero based budget where every dollar is allocated before it comes in. When the paychecks are deposited each and every dollar is assigned a job, whether it be paying bills, groceries, personal spending money or savings. Since we give every dollar a job, money doesn’t just “disappear” in the ether, and we have more money at the end of the month.
We’ve been using the envelope system for problem spending categories as well. Sometimes, even when you have a budget, you inadvertently spend more than you should in categories like groceries, eating out or miscellaneous spending. Using the envelope system is helping us to eliminate those overspending problem areas. We have a set amount of money in our envelopes every month for those problem categories. When the money runs out, we can’t spend anymore. It’s a nice concrete way to control our spending.
Unintended consequences of making a plan
One thing we’ve realized since we’ve been doing our monthly budget is that there are some great side benefits to doing the budget, besides the improvement to our bottom line. Here are a few:
- We argue less about money: Since we have a budget, and we both know what our financial plan is, there is less opportunity to disagree and argue about money. We used to argue about each other’s personal spending money every month (her spending on clothes, my spending on electronic gadgets). Now we have a budget, and we both have a set sum we can spend every month without having to ask the other. That makes it easier to trust each other and not have to worry about spending on things we shouldn’t.
- We are more peaceful about our financial situation: It’s so much easier to feel peaceful about your financial situation if you have a plan, and you know how much money is coming in and going out. Before we felt like we were doing ok, but there were also times where we felt like we were sinking. Now we KNOW where we are, and it gives us peace.
- When bad things things happen, we don’t feel panic anymore: When life happens and an emergency comes up, we don’t have to feel panic anymore. We have an emergency fund, and are building up 3-6 months of expenses (as suggested by Dave Ramsey) and we know we can weather the storms that might come our way. Previously a large car repair bill or medical bill might have caused us to panic and feel like we weren’t in control. Now we have a plan for emergencies, and insurance to cover large expenses (like medical bills), and we are more confident in where we are.
- We’re eating healthier: Because we’ve cut down considerably on eating out at restaurants the last couple months, it also means that we’re eating healthier. Previously we would eat out 5-7 times a week, and not only was it a budget drain, but we weren’t eating very good. Because our budget cut out a lot of that eating out, we’re making out own meals now, and making healthier eating decisions.
- We’re able to help others: Because we’ve been taking financial classes, and because we’ve setup our own budget, we’ve been able to help others on their road to financial peace as well. People see us pulling out our envelopes to pay for things, and are naturally curious. This has allowed us to get them into doing their own budgets, and turning around their own financial situations.
- It’s easier to say no. We don’t buy as much junk: Before we would just buy stuff because we liked it, or because it was on sale (why not?). Now, because we have a budget, it’s easier to say no to purchases because “it doesn’t fit in the budget”. This means we’re saving a ton of money on “stuff” as well as meaning we don’t have as much clutter around the house. Double benefit - more money, less clutter!
So those are a few of the unintended but welcome benefits that we’ve found as a result coming up with a financial plan, and doing a budget.
Are you doing a budget?
Is your family on a budget? Why or why not? If you are on a budget, what unintended consequences did you find once you started working your plan?
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Personal Finance Bible Verse Of The Day: Your Value
Indeed, the very hairs of your head are all numbered. Do not fear; you are more valuable than many sparrows. Luke 12:7
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Full Scale Stimulus Package Pushed Back Until After Inauguration
An article in the Washington Post announced today that democrats have put plans for a full scale stimulus package on hold, at least until after Barack Obama is inaugurated in January.
Congressional Democrats yesterday abandoned plans to offer a wide-ranging economic stimulus plan next week, putting off any chance that the federal government would provide a major jolt to the economy until after President-elect Barack Obama is sworn in Jan. 20.
A smaller package that would include an expansion of unemployment benefits and aid to struggling auto manufacturers has been proposed, and will be brought to the floor this week.
Democrats have scaled back their proposal to a package that will include a $6 billion expansion of unemployment benefits and a $25 billion cash infusion for the struggling auto industry, setting up a confrontation with Senate Republicans over whether the government should expand its rescue program beyond the financial sector.
Senate Majority Leader Harry M. Reid (D-Nev.) plans to offer that package Monday, the first day of what is slated to be a week-long lame duck session of Congress. A key vote could come Wednesday and if that fails, Democrats may have to settle for the 13-week extension of unemployment benefits as the only economic measure approved before they close until January.
Sounds like not a lot of useful measures are going to get passed in this last session. In some respects that may be a good thing, the less that congress does, the better off we’ll be.
When it comes to the cash infusion for Detroit automakers, a lot of legislators are opposed to such a measure.
A growing number of Republicans — upset that the TARP program has resulted in the largest intrusion of the federal government into the private marketplace since the Great Depression — are opposed to an auto bailout or the inclusion of other industries in the rescue plan originally designed for the financial services sector.
“When is enough enough?” said Sen. John Cornyn (Tex.), who is slated to take over the GOP’s campaign committee next year. ” . . . With the very first vote after the election, Democratic leaders in Congress want to pass a $25 billion handout to Detroit with no promises of reform, accountability or transparency by the automakers and their union base.”
“You’ve got to let them fail,” Gov. Mark Sanford (R-S.C.), the incoming chairman of the Republican Governors Association, said at the group’s annual meeting in Florida. “They made some bad bets, and there ought to be a marketplace consequence.”
To a degree I have to agree with this sentiment. When companies make bad decisions, they ought to feel the consequence of those decisions when their companies go through hard times. Bailing out all of these companies in the financial sector, automakers, etc just results in companies feeling like they can make bad decisions without too much consequence. If they get in trouble, the government will just bail them out.
What are your thoughts on a proposed bailout of struggling automakers? Do you think that a stimulus package not being passed this year will have ill effects - or in the long run be a good thing?
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