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How Much Is Christmas Going to Cost You?
By JLP | December 20, 2006
If you charge this year’s Christmas, how much will it cost you? Take a look at the graphic below, which assumes total charges of $1,500 on a card with a 12% APR. According to my numbers, if you pay 11 payments of $135, and one payment of $113, you can pay it all off in 12 months. You will end up paying $98 in interest.
The problem with this is that unless you are budgeting (saving) for next year’s Christmas, you’ll have to pull out your credit card and start the process all over again. See how easily this can become a cycle? So how do you get out of this cycle? Well, you could…
1. Pay off the credit card and save for next year’s Christmas simultaneously, provided you have enough cash flow to do both.
2. Pay off the credit card and pare back on next year’s Christmas so that you can eventually pay cash for Christmas.
For a lot of people, option 2 is the only reasonable way to go. The problem is: how do you cut back on your Christmas spending? I think the easiest thing to do is to create a Christmas budget. A budget will help reign in spending on all the extra stuff that we seem to buy. If you look at your budget and see that you are still going to spend too much, perhaps you could talk with your extended family and tell them about your goal to pay cash for Christmas. They might agree to a less expensive gift exchange or even skip the gift exchange for a year. Of course, they won’t know unless you have a conversation with them.
The advantage of paying for Christmas with cash through a budget is that you can purchase gifts throughout the year if you choose. So, if you know someone wants something in particular and you see that item on sale in June, you can pay cash for it then and save it for Christmas. A budget gives you piece of mind because you know what you can afford to spend.
Try it! It works.
Oh, and if you ONLY pay the minimum payment each month, you’ll still owe over $1,300 in 12 months (at 12% APR):
So, please pay more than the minimum payment each month!
Now, tell me… What are you doing that works?
Topics: Budgeting, Credit Cards | 9 Comments »
December 20th, 2006 at 2:13 pm
Cash baby! This will be our first Christmas ever that we haven’t used credit cards. Well, we used them but only for leverage and rewards – we have the cash to pay it. I’m really proud of us. It was only possible though because of saving throughout the year. We ended up with close to $800 saved and the rest we were able to cover with non-saved money. It’s such a great feeling!
December 20th, 2006 at 3:47 pm
What am I doing that works? Not buying gifts! Seriously, in this day and age, many people just buy for themselves what they already want, making it extremely difficult to buy anyone anything. For the people that I really do want to give gifts to, they’ll get them when I make them (and yes, I will make handmade gifts especially designed for each person). Why do I have to wait for a religious holiday celebrating the birth of someone I don’t believe in to give my loved ones gifts? Baahumbug!
December 20th, 2006 at 4:13 pm
I used credit and cash, but it was budgetted and planned for ahead of time. We used about half of my extra paycheck this month (it’s my 3 paycheck month) for gifts.
December 20th, 2006 at 5:46 pm
I paid for the gifts with a credit card, but I’m planning on paying it off entirely. I’m a grad student and I am paying for the gifts I bought with the proceeds of selling my books (purchased used) back to the book store. I considered selling them on Amazon.com or Half.com, but I wanted to money now and it saves me trips to the post office.
December 20th, 2006 at 8:12 pm
My approach is to return all the crappy gifts people get me that I don’t want and use the cash and credits for the next round of gifts I buy. It’s the gift circle of life.
December 21st, 2006 at 10:40 pm
The only stuff we’re getting for Christmas that we haven’t paid for yet is about $100 in gifts that weren’t available until a couple of weeks ago, so we weren’t billed before that. And the food.
December 22nd, 2006 at 6:22 am
Star Money Articles for the Week of Dec. 18
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December 24th, 2006 at 2:04 am
[...] All Financial Matters calculates how much charging Christmas costs. [...]
January 2nd, 2007 at 7:10 pm
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