Deanna Booker is a woman with a mission. As the Communications and Community Outreach Manager for local nonprofit Consumer Credit Counseling Service of MD & DE (CCCS), she presents scores of educational seminars and fields countless media interviews each year. In both settings, her calling remains the same: “I am here to make a difference,” she says. “I give people the financial knowledge and skills they need to make informed decisions. I show them how small changes in their financial habits can improve their quality of life.” From a money management perspective, Booker says the holidays offer a unique challenge. “This time of year, it’s so easy to overspend. For months, we’ve been bombarded with retail ads telling us to ‘buy, buy, buy,’ and we don’t want to disappoint. We want to give our loved ones the things they desire. But it’s easy to end up in trouble if we don’t know how much we can afford to spend, and we don’t have a plan for paying it all back.”
To avoid this outcome, Booker recommends that consumers set up a holiday budget before they ever shop. “Having a budget is crucial. Look at how much money you have coming in and the day-to-day expenses you’re already committed to paying, like for rent, food, and utilities. When you subtract these regular expenses from your income, what you’re left with is how much you can really afford to spend on holiday cheer.” Booker also recommends consumers “act like Santa” and create a list of the people for whom they hope to buy gifts and assign a spending limit for each. “Also include other costs, such as decorations, entertainment, or travel that you’re considering. If you find the amount you plan to spend exceeds the amount you can afford, it’s time to trim back. Narrow your gift list and reduce the amount you plan to spend on each item.”
Developing a holiday budget and a spending plan is only the first step. Sticking to your strategy is the real challenge: “Make sure you take your list whenever you shop and don’t be swayed by the temptation to charge it now and pay later. Look for ways to make the holiday meaningful without going into debt.”
With planning, it’s possible to limit holiday spending on several fronts: To save the cost of Christmas cards and postage, send a year-end letter to family and friends by email or use one of the free electronic greeting sites. Instead of buying tinsel and ornaments, decorate your home with things you already have on hand or can gather outdoors, like pine boughs or cones. Share a talent or service instead of buying a gift. If you have a large family, draw names instead of purchasing something for each person.
Booker suggests, “Emphasize spending time together instead of spending money. An evening at home playing board games or Christmas caroling in the neighborhood can be a lot less expensive and a lot more satisfying than going out to a meal and a movie with your children. Think in terms of making meaningful memories -- not just spending for spending’s sake.”
Booker has thought a lot about how to incorporate this philosophy into her own life. “I’m a member of a large, extended family and we’ve just welcomed a new addition -- my baby nephew, so this holiday is already more meaningful. After some discussion, we’ve decided to take a ‘less is more’ approach to celebrating. We plan to focus on spending time together at home instead of going out and spending money, and we’ve decided to cut back. There won’t be any gift exchange among the adults in our family for the first time this year.”
The holidays also offer parents a chance to teach their children a valuable lesson in personal finance. Booker, who has two teenage daughters of her own, advises, “If they come to you with a wish list for eight items, explain that you cannot afford everything they’ve written down. Ask them to choose the two they desire most and write a sentence about each explaining why it’s important. This will help them learn to set financial goals and recognize the need to spend within your means.”
The temptation to overspend may be particularly keen for those who already are living on the edge. Many Americans are still paying off debts from last year’s holiday season. Booker urges, “If you’re having trouble making ends meet, sit down and candidly discuss your financial situation with your children and loved ones. Be honest about your desire to avoid overspending; then work together to develop new traditions that don’t require spending.”
Booker, who has 15 years credit counseling experience, cautions consumers to avoid going into further debt to pay for holiday expenses and says that payday loans and title loans are two strategies to avoid. “These loans are very tempting, because they offer a quick fix. But people need to be aware that the cost they pay may be much more than the hundred dollars for which they initially applied,” she notes.
Payday loans are small, short-term loans intended to cover a borrower's expenses until his or her next payday. When money is tight, these loans provide ready access to cash, but when applying for them, consumers often don’t recognize the risks involved. These include high borrowing fees, high interest rates, and high security risks involving personal information. Fees charged for payday cash advances may range anywhere from $10 per $100 up to $30 per $100 borrowed. Once you’re locked in, amounts are directly withdrawn from your checking account each payday.
In Maryland legitimate payday loan providers must be licensed. Maryland also caps the amount payday loan companies can charge for interest at 33 percent. Despite these limitations, consumers who take out payday loans still may end up in financial trouble. Booker concedes, “As the interest adds up, your payments get higher, and before you know it, you may find yourself taking out another payday loan just to make ends meet.”
A title loan is a short-term loan where consumers offer their car titles as collateral. These loans must be paid back within a certain period of time, often 30 to 90 days, and usually involve a very high interest rate, often 350 to 400 percent. Booker notes, “Title loans are particularly risky. When you apply, you’re putting your car on the line. If you don’t pay the money back, you could lose your car and still owe on the loan.”
Title loans are illegal in Maryland, but they are still available online. Booker highly recommends consumers avoid taking this route. As she rushes out the door to her next workshop, she concludes, “When it comes to holiday spending, stop and think. The Christmases you remember are rarely tied to the big-ticket gifts you give or receive. They are more likely to revolve around time well spent with family and friends. A warm meal at home, laughter and hugs -- these are priceless memories that didn’t cost a thing.”
In the coming year, follow Booker and her co-workers as they continue their quest to make a difference, one consumer at a time. If you would like to learn to budget or need money management advice, CCCS also provides free, confidential budget and credit counseling. To set up an appointment, please call 1-800-642-2227 or visit www.cccs-inc.org to learn more about what CCCS does.
Consumer Credit Counseling Service of MD & DE, Inc. (CCCS) is an accredited 501(c)(3) nonprofit agency that helps stabilize communities by creating hope and promoting economic self-sufficiency to individuals and families through financial education and counseling. CCCS MD State License #14-01 / DE State License #07-01.