A few weeks ago I was on hold with one of my favorite credit unions. Normally a call of this nature would yield a three, maybe four second wait time, but to my surprise a voice on the other end told me that my expected wait time was over 60 minutes, and to leave a number for a callback. When I finally spoke to someone at the credit union, hours later, I was told the long wait time was due to the enormous response of their annual holiday program.
I was intrigued! What's so special about this program that folks are lining up on the phones for hours? Are they giving the money away? Cuz I'm up for waiting for free money too, no problemo!
Alas, as it turned out, its not a free money deal, its not even a good deal! It is a 12 month loan of up to $1200 with a whopping 18% interest charge, and it has become a holiday tradition for the masses. Families who otherwise find the holidays pinching their pocketbooks can get the cash they need upfront, and then spend the rest of the year paying it off. Then they get another one the next December, and another the year after that, and on, and on, and on.
So every month of every year families who are already struggling get a little visit from the Ghost of Christmas Presents, in the form of that 18% interest. All this to pay for gifts that most likely have long been forgotten.
For all of those who turn to loans to get through the holiday season, I have a better plan for you. Let"s call it the "Buy Five Get One Free" plan. Here is how it works - Starting in January, put $118 a month away (100 for the holiday savings, $18 for the interest you pay yourself). At the end of the year you will have $1416 set aside. Take out $1200 for your Personal Holiday Loan, and keep the rest in the bank. Do this every year for the next four years, and guess what? At the end of the fifth year you will have enough money left over to pay for an entire holiday loan. Your sixth year is free! Now that is a buy five get one free plan to make you and your budget merry.
So tell me, how do you manage your holiday spending? I'd love to hear other strategies that work for you!