A debt-free Christmas
By ROSE YASMIN KARIM
Saturday December 13, 2008
Have you checked your credit balance lately? Find out what you can afford
before charging purchases to your plastic, and you’ll jingle all the way when
bills arrive in January.
Lydia Ooi is big on Christmas. She generously spends on her colleagues and
family, and just loves hosting Christmas parties. But not this year, though.
“I’m not sitting out Christmas, but with the looming credit crunch I’m
definitely toning down my expenses,” confesses Ooi, a, cabin crew.
“I began by drawing up a gift list in August. It took up two whole pages, so
I rewrote it. Then I set a budget of RM500. Shopping became a new experience
because I paid attention to what things cost, and I had to be creative to
stretch the money,” she adds.
The 26-year-old says she’ll be saving RM700 on presents this year.
|Selina Teng with her family and pastor
at church. Selina makes it a point to buy Christmas presents in advance
so she doesn’t panic later and end up spending a lot.
“I’ll be chipping away at my credit card balance so I don’t turn into a
debt-ridden, nervous wreck come New Year.”
Ooi is not the only one who feels gaining control over her finances is more
important than splurging on Christmas presents.
“Take a good, hard look at your finances and determine what you can afford
and set your limit,” says Selina Teng, a businesswoman. “Buy for those in your
household first. Then, if you have any left over, buy for those closest to you,”
Selina makes it a point to buy presents early so there is no panic purchase.
“If I see something I can afford at the stores that I know my recipients
would appreciate, I’d buy and squirrel it away. This way, I’m less likely to be
rushing around on Christmas eve and I have ample time to survey the price so I
know a good deal when I see it.”
While Selina is sensible with her spending, there are others who can’t bear
the thought of appearing broke. They just feel awfully guilty about not being
able to purchase presents for friends and family.
“So out comes the credit card,” says financial coach and author, Carol Yip,
43, shaking her head.
“If you really cannot afford Christmas, be honest with yourself. Sure, you
shouldn’t worry your children about money, but it’s not such a terrible idea to
sit them down and explain that when times are difficult there won’t be any
charging of toys to the credit card.
“Explain to your loved ones that you can’t afford expensive presents this
year. Children can be more understanding than you give them credit for, and
having to explain a financial disaster later on is going to be a lot harder for
you to deal with.”
Yip recommends saving up in advance for Christmas expenses so you have cash
on you, instead of resorting to the plastic.
“Zero interest instalment sounds like a good idea. After all it’s money for
nothing, but remember, if you don’t settle the full amount by the due date you
may be charged interest on the full purchase price, not just on the outstanding
balance,” she cautions.
Despite the uncertainties in the economy, it seems consumers are determined
to enjoy themselves, with shopping malls choking with shoppers stuffing their
bags like Santa.
“The roots of Christmas is to give from the heart, and to share and spend
time together and give to those who aren’t so fortunate,” says Pastor Victor
Wong Chen Nam, 42.
“It’s sad that a festival celebrating the birth of a humble man from a poor
family has been twisted into a spending spree that leaves many families with
debt and other problems.”
Up until October 30, Credit Counselling and Debt Management Agency (AKPK)
advisors have taken on more than 19,000 new debt cases.
“We don’t tell people they shouldn’t take loans but we point out the possible
negative consequences of shopping on credit. It’s easy to get credit, and it’s
also easy to get into debt,” explains Devinder Singh, 42, an advisor at AKPK.
The people who are most likely to be tempted to take out loans, says Devinder,
are also unfortunately the ones who are least likely to know what it’s going to
“People are easily indebted because of the low level of financial literacy.
To help people get a grip of their finances, AKPK provides free credit
counselling and financial education on the responsible use of credit, budgeting
and basic money management.”
So how do you make sure you don’t fall into the debt trap?
“Those that have serious financial problems should seek professional advice
as soon as possible because the longer they leave it, the worse it becomes. Talk
to your creditors. Don’t just stop payments without explaining why. They can
sometimes be more understanding than you might expect.
“Borrowers can also get AKPK’s assistance in rescheduling or restructuring
their housing loans, hire purchase loans, and personal loans, or outstanding
credit card balances if they are dealing with financial service providers under
the purview of Bank Negara Malaysia.”
Should you require credit, Devinder suggests shopping around to find the best
“Always make sure you read the terms and conditions thoroughly before you
sign, and study the interest rates, loan tenure and the monthly payment amount,”
“Personal loans are often cheaper than credit cards but they are not so
flexible. You are usually locked into a payment schedule, and there are
penalties if you want to clear the debt early. However, there are sources of
credit that lets you make overpayment or even early full settlement without
“Of course, the sooner you pay off the loan the less total interest you are
charged. To help ease your cash flow over Christmas, there are banks that give
customers the option to skip their mortgage instalment for the month of November
and December where spending is high,” Devinder points out.
So have a merry Christmas and try and spend wisely.