Courtney McGrailCareful planning and avoiding extravagance is the way to avoid post-Christmas financial blues writes John Reid
John Reid
Christmas is a time when people can feel under extraordinary pressure to spend money and to show their love, particularly in material ways, for family members and friends. Some feel obliged to borrow money for presents or a family trip. However, the cost and stress of this, particularly in the long month of January (and beyond) when one has to contend with constrained personal financial resources and debt, show the folly of living beyond our means in the run up to Christmas.
“It is important to save and to put things by, long in advance of Christmas,” says John Mark McCafferty of the Society of St Vincent de Paul (SVP). Oftentimes, common sense and time-tested wisdom can head off crippling stress over Christmas and dangerous debt after. Ideally, “people would start preparing now and planning their finances”, he says, adding that it is crucial for people on lower incomes “to try to buy presents earlier, in order to pick up bargains”.
Don’t wait until close to Christmas, as it is always tempting to do.
The golden rule that a household should live within its means applies all year round but is especially true at Christmas: people should try to avoid expenses exceeding their income. The emotional and sentimental pressures of the season compounded by the modern phenomenon of high commercialism, Christmas having become the most important time of the year for retailers, can lead people to break this time-tested rule. That this happens can almost be a rule in itself!
Acknowledging that Christmas is a very challenging time for people, especially those on low incomes, the Society says if people feel obliged to borrow money in order to provide for everybody in the family, they should visit their credit union.
This may not be a realistic option for those who may have burnt their bridges with their credit union, says John Mark, urging people to steer clear of moneylenders and if necessary ask the Society of St Vincent de Paul for help.
One option, John Mark says, is a progressive new innovation in the credit market called ‘It Makes Sense’ loans, a personal microcredit scheme first piloted last November. Allowing people to borrow small amounts of money at low interest rates, thereby avoiding the clutches of moneylenders who demand usurious interest rates, the scheme has proven to be a “resounding success”, he says.
MABS
The Money Advice and Budgeting Service (MABS) has also hailed the introduction of this scheme, with a spokesman for MABS claiming that their prompting may even have been responsible for the loans’ invention.
Michael Culloty of MABS’ Social Policy and Media Office says the loans are “a fantastic opportunity for low income people, as it is a way for them to borrow small amounts of money at low interest rates. This is a way for people who have a bad record with banks or the credit union to become financially included again.”
Planning your finances ahead of the Christmas period is stressed as a vital task by both the Society of St Vincent de Paul and MABS. John Mark points out that poorer people have a tendency to plan week-to-week or even day-to-day, which causes problems as over longer periods they can suddenly find themselves without money and in debt to others, particularly in the months after a period such as Christmas.
Michael Colloty says some families spend the guts of the following year paying off debts incurred at Christmas.
Personal budgeting, so important in the run-up to Christmas, is the specialty of MABS, such that John Mark says the SVP advises people who fear that they may encounter financial problems over Christmas to engage with MABS, even with a phone call.
MABS will prioritise people with large debts. Their advice is primarily for people on low incomes, either social welfare recipients or those who are on low pay (or who are both). If people are working, they will be entitled to a family income supplement, and it would be useful for people to enquire at the Citizen’s Information Centre for information on their social welfare entitlements.
Young families in particular can come under pressure over the Christmas period, Michael says: “For example, parents who have been saying to their children all year that they must wait until Christmas for presents then come under pressure at Christmas time to buy expensive presents.”
Bargains
He advises parents with young children to encourage them to “write to Santa early”, before they get sucked up in Christmas advertising campaigns and while bargains can still be picked up. Children should be advised about “what may or may not be within Santa’s power”.
The importance of adopting this approach is bolstered by John Mark’s telling observation that a contributory factor to the problem of people getting into debt over Christmas lies in how the marketing of goods in Ireland is arguably even more heavy than in the UK, due in large part to how Ireland’s national broadcaster, unlike the BBC, carrying many commercial breaks with advertisements for goods and services.
The pressure even to be seen to provide somewhat lavishly for their families over Christmas is arguably a contributory factor to lower income people getting into debt over Christmas, while Michael adds that another issue contributing to the risk of debt over Christmas is the fact that many families, particularly those who aren’t very wealthy, treat the season as an opportunity to replenish their clothing and get a new wardrobe.
A big pitfall MABS advises against is the tendency of some families to put off paying vital bills such as their electricity or gas bills, etc., in order to cover other expenses during Christmas. This then starts to bite in late February or early March when electricity bills start coming in.
Such people then get into trouble because they have been juggling their financial obligations. The threat of disconnection of electricity and gas, and dispossession, also becomes an issue around March.
In order to avoid such problems arising this Christmas, Michael advises that families look back at what they did last Christmas to see what they might learn. For example, did they throw out food that they did not use? If so, they should buy less food this time.
Reflect
Mr Culloty also suggests that you reflect on the reaction of your friends to the presents you bought them last Christmas, asking whether the thought had mattered more than the gift, and whether this might be kept in mind when buying presents this year.
MABS also advises people to ask the question: “How much did Christmas cost last year, and have the circumstances of income in the family changed this year as opposed to last year?”
Fundamentally, Michael says, people must remember that at this time of year, families must cut their cloth to meet their measure, “because you don’t want the joy of Christmas to be ruined by what comes afterwards”.
Another possibility, Michael suggests, is to try to recycle old presents that you haven’t used. For example, are there old presents lying in a drawer from last year that you never opened or used? Could you use these items as gifts to give to someone else this year? Reusing old presents can seriously help people in constrained circumstances keep the cost of buying presents down.
The social side of life in the run-up to, and during, Christmas, is an expense that could be managed in order to avoid the acquiring of debt. Parents should look at doing things with children that don’t cost anything, such as visiting extended members of the family instead of going to the cinema, or trips to public parks and amenities, etc.
Entertainment budgets are something that can result in the helpful saving of money if carefully handled. One option, for instance, is to ask friends to bring over drinks to your house for a get together and a meal, instead of spending money in a pub.
Even with careful planning Christmas can still be expensive, of course, so Michael repeats the importance of people in tight circumstances looking into ‘It Makes Sense’ loans. Advising people to should start applying now for such loans, rather than waiting until a Christmas rush starts, he says many credit unions offer the loans, and urges members of credit unions that don’t offer such loans to ask why not.
The loans, he says, provide a real opportunity for the credit union movement to get back to its roots, by helping ordinary people in local communities who might not have access to the credit that the large banks provide.