‘Tis the season of merry debts

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depositphotos_36811637_s-2015“It’s that renowned time when much debt is racked up during the spree of merry.”

The season of joyful giving hovers in our merry midst once again.

Some finances get stressed and stretched to the max — like credit cards creeping past their safe outer limits. The reasons don’t matter, it’s the outcomes that really count.

Easy credit is everywhere. It seems so painless at first. Just sign those tempting card offerings that sail through email and mail slots. Voila, it’s done. I receive at least a couple new flavours every month.

People love to be generous during these merry times. Yet good intentions can lead to frightful finances. A frosty thought that may cost dearly. Possibly, even a brush with financial ruin.

For example, making the minimum monthly payment on credit cards is akin to a slow financial death. With interest rates in the 20% ballpark, it takes a lifetime to pay off balances.

Good Samaritans wanted

Let’s reflect a little on the season that incurs those merry debts. Individuals who spend more than they can afford usually don’t do it intentionally. As we know, stuff happens: all in the spirit of giving.

Perhaps each of us can attempt a caring and gentle word with someone who may fall prey this season to the financial hazards of kindness. Friends can add perspective to this otherwise frosty topic.

Being a good Samaritan is not an easy mission. Your first task is to listen carefully with plenty of empathy and understanding. The goal is to convey positive aspects of credit discipline.

Muster up the most tactful approach. Friendly concerns may not be well received. Give it your very best, helpful try. Reach out and touch that someone courting financial trouble.

Look first for commitments to baby steps. Those typically lead to dealing with the bigger picture. They can make a big difference. One that keeps on giving year after year.

Friendly tips

Conveying these friendly tips may help:
• Establishing a reasonable allocation for the merry season; then trying hard to stay within the guidelines.

• Carrying the actual cash earmarked for purchases is the better choice instead of using credit cards; especially for those who have doubts the card balances will be paid off in January.

• Arranging a line of credit and transferring outstanding credit-card balances to it. The rate is likely around prime plus 1% to 2%, versus the 15% to 20% for many credit cards.
Setting aside an affordable amount each month into a “gift fund” for use during the gift giving occasions can be a financial saviour. If not for this season, perhaps, for the next one.

• Cutting up the credit cards if nothing else works. It’s painful medicine that may eventually cure the affliction — keeping in mind the discipline required to prevent a return to previous bad habits.

The good Samaritan gift to someone you know is to gently reinforce the idea of spending within affordable financial means; one gift surely to be treasured. If not now, hopefully at a later date.

Helping that needy someone avoid the pitfalls of easy credit is a wonderful talent. All the best to good Samaritans in doing that special something this season of merry giving.

Adrian Mastracci, MBA,  is president and portfolio manager for Vancouver-based KCM Wealth Management Inc., specializing in designing and stewarding retirement portfolios

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