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A debt-free ChristmasThe Star Online - 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,” she adds.

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 cost them.

“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 deals.

“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,” says Devinder.

“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 penalty.

“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.

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Carol Yip.

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