Beware the Splendor of Christmas
By A. B. Jacobs
Christmas tree

Summary:
Beware of overspending on gifts at holiday time. If you succeeded in holding spending to the cash set aside, you'll note there are no year-after bills to be paid. What better post-Christmas gift could you have possibly given yourself?

With Halloween now a fading memory, Christmas in all its splendor will soon be upon us. We approach no other holiday with such anticipation. However, embodied with the promises of gladness and fulfillment are temptations that cannot be ignored. Thanks to influence exerted from many areas, the season evolved into a passion to spend. For those families already heavily in debt with precious few spare dollars on hand, the last thing needed is an inducement to dissipate whatever is left. And yet, thanks to the efforts of a formidable marketing industry, this is exactly what many persons are persuaded to do.

How is it that people can be convinced to spend money they do not possess? Actually it's a relatively recent phenomenon. In an earlier time, before the advent of such devices as credit cards and home equity lines of credit (no, these did not originate in the Garden of Eden), most buyers made their purchases using checks written on accounts with actual funds on deposit, or with hard, cold cash. The closest that most of us ever came to financing an acquisition might have been from a neighborhood furniture dealer who permitted three or four equal monthly installment payments for a household item. The idea of going into long-term hock for anything other than a home mortgage, or possibly an automobile, seemed unthinkable.

The money we earned actually went to acquire things we wanted, with no portion diverted to a lender as interest. Of equal importance, we did not live particularly high on the hog; we only purchased affordable things. Although by today's standards it may seem that we deprived ourselves of many consumer articles that seem mandatory for an enjoyable existence, I cannot recall ever feeling distressed because of my lack of something. In general, life without an abundance of physical possessions can nonetheless be pleasant, for personal contentment depends more upon what you value than what you possess.

Now that I've described how we Homo sapiens subsisted in a prehistoric era, I'd like to suggest its application to this Christmas season. For those of you who harbor any sense of financial discomfort, or for whom the prospect of uncontrolled holiday expenses is less than welcome, I'd like to offer a suggestion. You might borrow from the scenario I just described and, with the cooperation of your family and significant others, relegate the season to a single number.

Specifically, you will decide not on the presents you wish to give or the festivities to be engaged in, but rather the total number of dollars you choose to spend. You will then set this sum aside, in cash, in a separate location, and from this aggregation all yuletide expenses will be funded-and by all, I mean all. Whether it is the Christmas tree you mount and decorate, the cards you send to friends and relatives, the presents for loved ones, or the family feast consumed on December 25th, every dime in payment must come from that single stash of cash. There is to be no credit card borrowing, no salary advances, and no withdrawals from a savings account. This will be an exercise in budgeting at its most basic level, for if the cash is not there, the expense cannot be incurred.

The key, of course, will be priority. The expense of each item you select must be weighed against its relative value compared with other items you desire. Is the bicycle you want for your son more important than the wristwatch for your spouse? It may seem unfair that you must consider such things at this festive season, but in the final analysis, this is what the world of money is really all about. If you decide to follow my Christmas plan, you realistically enter the world of money where you control your finances. I must warn you that there are powerful forces who will do what they can to subvert your best intentions.

The marketers are already underway with their advertising blitz, assuring you that whatever you faintly desire is yours by entitlement. The institutional guilt trip is in full flower. As for payment, no need to worry: There'll be no installments due until next year. And should the cost for such borrowing justify denying yourself and your loved ones the things they deserve?

Umm, what is the cost? The details are buried somewhere in the fine print of your credit documents. If you finance your purchases with the Bank of America credit card I hold, your annual percentage rate will be 18%. If it is a cash advance you need, the rate rises to 25%. You may be certain that the cost of your borrowing will be comparable. If these numbers are not upsetting, there is a bridge in Brooklyn I'd like to sell you.

With that, I'll conclude my recommendations for the holidays as we fast-forward to January of next year. If you succeeded in holding spending to the cash set aside, you'll note there are no year-after bills to be paid. What better post-Christmas gift could you have possibly given yourself? And with that realization, I'd like to leave you with an afterthought. If December can come and go, leaving in its wake a sense of financial relief, why not consider extending that philosophy to the other eleven months of the year? What I'm suggesting is that you take control of your life by truly living within your income. Purchases will be with funds you actually hold, and personal borrowing becomes a thing of the past. Admittedly your creditors will lose you as a customer, but perhaps it's a burden you're willing to bear.

Al Jacobs

nobodys fool book cover He is the author of Nobody's Fool: A Skeptic's Guide to Prosperity Al has been a professional investor for nearly four decades. His business experience ranges from real estate, mortgage, and securities investment to appraisal, civil engineering, and the operation of a private trust company. More about A. B. Jacobs.

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