In case you hadn’t noticed, it is now the first week of December. That means that Christmas is just around the corner. It probably also means you find yourself filled with stress over holiday shopping. Say it a different way. Though the shopping can be stressful, it’s the holiday spending that causes the real problems.
Any number of people will offer you advice on how to navigate the pitfalls of holiday spending. Here’s what it comes down to for me: KNOW YOUR LIMIT.
I’m not trying to be doom and gloom by using the OLG’s slogan for responsible gaming. If you use your credit cards to make your holiday purchases and aren’t sure when or how you are going to pay it off, you are gambling on your future. The overused expression “I’ll make it work” does not count as a plan.
Here’s an interesting tool that I found to help you estimate the real cost of paying off your high interest credit cards.
Let’s say that you put $2,000 of purchases on your credit card this December. If the interest rate is 18% (and you don’t already have a balance on the card), your minimum monthly payment is $60. That doesn’t sound so bad. However, you’ll be making that payment for 13 years and 10 months, paying almost $3,800 in total.
How does that feel? It’s like you’re still paying for your purchases from before 1999. Put that in perspective. We’re talking about when all the talk was about the Y2K problem.
What if you already have a balance owing on your credit card and this year’s purchases take you up to $5,000? You’ll be making your minimum payment of $150 monthly for 18 years and 10 months, paying almost $9,800 in total.
What if you have two other credit cards that also have a balance of $5,000 each? That’s a monthly payments of $450 for 24 years and 11 months, paying almost $29,800 in total. I’ll stop now.
Clearly, my message is to make careful use of your credit cards. Temptation is everywhere. The 60 inch HD TV you’ve had your eye on is $500 off. You can buy a Blackberry Playbook for less than $200. There are even ads suggesting you buy a new car for that someone special in your life.
The shine from these toys will fade in short order. Without a plan, the stress of paying for them will be with you for much much longer.
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