Recovering from Christmas debt

By Laureen F. Guenther Times Contributor

Many people give generously at Christmastime, and that can lead to debt hangover in January.
But over-spending can happen any time of the year, said Nadia Graham with the Credit Counselling Society in Calgary. Fortunately, she offers helpful advice about dealing with it.
“The Christmas season, the spring season, the back-to-school season, pretty much every season,” Graham said. “We see people who are over-burdened by spending. It can be clothing. It can be groceries. It can be dining out. It can be all kinds of other issues.
“Repairs around the house. We all know furnaces, water heaters, appliances, sooner or later they need to be replaced. Auto maintenance is another big (item). If one doesn’t plan for them, they tend to go on a credit card and become part of an overall debt issue.”
That initial debt, Graham said, can lead to more debt. If a family puts $3,000 worth of Christmas gifts on a credit card with an interest rate of 19.9 per cent, for instance, and then makes only minimum payments, it will take 53 years to pay off, costing an additional $12,700 in interest.
Lingering debt can lead to other problems. Graham has known families whose debt load meant they couldn’t pay for dental care or afford activities for their children. Children see, hear and feel the tension that debt creates in the home, she said. And in extreme situations, a family’s debt may require them to use food banks or go to Alberta Works to get their utilities reconnected.
But there are ways to fix the problem before it gets to that point.
“First thing is, if you’ve dug yourself into a hole, stop digging,” Graham said. “Develop a budget. Track your discretionary expenses; that would be things like your clothing, your dining out, your entertainment, lottery tickets. Or the kind of things you don’t have to buy. Putting money that you spend aside for, be it gifts, be it house repairs and maintenance, auto repairs and maintenance, clothing, the things that don’t happen every month.”
If taking those steps is hard, there’s helpful information at nomoredebts.org and mymoneycoach.ca. The Credit Counselling Society also offers free, unbiased help.
“We can help them with budgeting assistance. We can help them to manage their finances,” said Graham. “If they have a lot of debt, we can discuss what options they have available to them to deal with the debt. We can discuss what options they may choose to take to deal with this situation, and how they can progress going forward.”
She urges people to ask for help sooner rather than later.
“Be proactive,” she said. “Don’t wait until you’re desperate. Don’t wait until you can no longer make your minimums. And if all you’re making is your minimums, it’s time to look at another option.”
When next Christmas comes, Graham suggests viewing gift-giving differently. Children who receive lavish gifts are not more loved than children whose gifts are more modest, she noted.
And spending quality time together or performing acts of service – like washing someone’s floor or staining their deck – might be treasured even more than a gift that’s wrapped and put under the tree.