This past holiday season, consumers as well as retailers felt the effects of the not-so-great economy. With the financial system the way it is, budgeting was the latest trend. Even with the extra budgeting, “the holiday debt hangover” which many experience has not yet disappeared.
During these past months, the economy played a major role in the consumers’ holiday spending. The confidence of consumers fell during the holidays due to the unemployment rates which are still on the rise, the credit and housing market conditions, as well as the higher food and energy costs.
As stated by Bloomberg News reporter Joseph Galante in his article “Holiday spending growth at a Five-Year Low,” MasterCard advisors announced that the spending this holiday season was anything but impressive.
Galante reported that “MasterCard’s consulting unit said [on Dec. 25, 2007] that sales from Nov. 23 to Dec. 24 gained 3.6 percent.”
A spending growth of 3.6 percent is minimal compared to the past. Last holiday season, in 2006, the numbers trumped that of 2005 with a growth of 6.6 percent.
Even with the spending trends being at an all-time low, the holiday spending is still hurting the bank accounts of consumers.
Sklar Carmosin & Co.’s certified public accountant, Lenny Kane believes that debt arises more after the holiday seasons than any other time throughout the year.
Kane believes that “the high percentage of retail sales take place during the holiday season. The effect of this is more debt.”
Due to the economy already having a heavy strain on the financials of consumers, the holiday seasons spending may not be the only debt people are experiencing.
Looking at statistics, credit card debt is rising. Kane says the reason for this statistic is “the combination of individuals already in a financial bind having increasing credit card debt and additional people becoming in debt due to the economy.”
The economic problems certainly have not helped anyone’s financial situation, but every person and every case is different.
Setting priorities and making a checklist is extremely important in order to get out of any financial dilemma.
The first step is to begin a “‘financial diet’.” Kane said. “A ‘financial diet’ involves setting a budget that includes funds to repay the debt.”
Debt will not go away on its own. Taking action is the first step to getting rid of any problem.
Sophomore marketing major, Molly Kearney, took action right away.
“I had a job over the holiday break,” Kearney said. “This helped me put the money I spent on gifts back into my bank account.”
If there are multiple bills that need to be paid off, setting a priority list is crucial.
“Starting with a budget and taking a look at what expenses are necessary,” Kane said.
After noticing the weaknesses and the top priorities, a plan is to be made.
“Some may look at home equity loans, others may look at transferring their credit card balances to lower interest rate cards,” Kane said.
After researching ideas and building a solid approach, it may be necessary to set up a meeting with a debt counseling service company.
These services can not only give you advice, but may be able to renegotiate the terms of the debt and have some of it forgiven. Remember, this may have its pitfalls as well bring on taxable income.
So, we learned from Kane that the ‘financial diet’ is a requirement in order to get out of debt.
Yes, this may sound relatively easy to just set up a plan and start checking off the list as you go.
On the other hand, Kane said, “like any diet, the hard part is sticking to it.”