October 07, 2021
Now that Fall is in full motion, you and I know that we’re soon heading into the dangerous holiday season. Dangerous because your heart tugs at you to spend more than you should for gifts.
After health and happiness, my wish for everyone this coming holiday season is that you find the strength to stand in your financial truth. You are not loved based on the size of your holiday budget. You are the best gift for your loved ones and friends. If you think a relationship is based on bestowing material gifts that cost money, you have a broken relationship. Or a broken sense of your own worth.
But I know it can be hard to resist all the ads and temptation to spend more than you should. And there’s an increasingly popular spending trap I want you to steer clear of this holiday season.
I’ve written before about why I don’t like Buy Now Pay Later (BNPL) deals where you can pay just 25% to purchase something if you agree to pay the remainder over the coming weeks or months.
Now we have some real-world proof that BNPL deals are often a costly tease. Nearly 40% of people who have used a BNPL offer said they missed a payment. Not only can a late payment trigger a fee, or an interest rate charge, but it can also hurt your credit score. In a Credit Karma survey, nearly 3 in 4 people who said they were late with a payment saw their credit score drop.
I don’t think you need me to point out that no gift is worth a hit to your credit score.
Please take a moment right now to make a pledge to yourself. If you want to purchase a gift, it must be something you can afford to pay for right at the point of purchase. No BNPL. And no letting your credit card balance roll over unpaid into the next month.
It’s always been odd to me that people save their financial resolutions for January. I think the best time to commit to a financial spending goal is before the temptation becomes strongest. Set your holiday spending goals today —before the holiday marketing frenzy kicks into the highest gear— and I think you are going to enter 2022 feeling proud and strong that you stood in your truth.
Answer Yes or No to the follow statements.
I pay all my credit card bills in full each month.
I have an eight-month emergency savings fund separate from my checking or other bank accounts.
The car I am driving was paid for with cash, or a loan that was no more than three years, and I sure didn’t lease!
I am contributing at least 10% of my gross salary to a retirement plan at work, or I am saving at least that much in an IRA and/or regular taxable account.
I have a long-term asset allocation plan for my retirement investments, and once a year I check to see if I need to do any rebalancing to stay on target with my allocation goals.
I have term life insurance to provide protection to those who are dependent on my income.
I have a will, a trust, an advance directive (living will), and have appointed someone to be my health care proxy.
So how did you do?
If you answered yes to every item, congratulations. If you are working on improving on a few items, I say congratulations as well.
As long as you are comitted to truly creating financial security, I applaud you. If that means you are paying down your credit card balances, or are building up your emergency fun with automated payments, that’s more than fine. You are on your way!
But if you found yourself saying No to any of those questions, and you’re not working on moving to Yes, then I want you to stand in your truth. No matter how good you feel, you have some work to do before you can honestly know what you are on solid financial ground.