How to Have a Happy, Money Worry-free Christmas

Love and money should be mutually exclusive concepts at any time, and especially at Christmas.  You don’t have to spend money to show someone that you love or care about them.  You, your presence in the moment, your willing engagement and a genuine smile will be the best gift you have ever given.

There is no need for a pile of expensive gifts.  For anyone over the age of twelve, Christmas is not about presents so there should be a reduced need for expensive, guilt-fuelled shopping expeditions.

The final week store rush is nothing but stress.  Crowds, lack of parking, high prices and poor spending discipline generally don’t make for a happy holiday period.

On the other hand, relaxation, peacefulness and humanity are the makings of a much more enjoyable Christmas day, and when combined with a budget lunch, can create some much loved traditions and great memories.

Also if you keep a lid on your spending, your Merry Christmas won’t turn into an unhappy new year when your credit card statement arrives.  And you won’t be facing the New Year in turmoil.

As I am writing this, my wife and daughter-in-law are sitting in the cool air-conditioning having fun making the most beautiful handmade decorations from simple A4 printer paper.  A little paint and sparkles from the local craft shop and we have the best looking Chrissy decorations ever.

I know from experience that my financial advice and assistance work starts in January when two powerful forces combine.  They are debt regret from excessive Christmas spending and the resolution to turn over a new leaf as 2017 unfolds.

Not everyone will change.  For most, their resolutions will simply evaporate into lost wishes as work and home routines take over.  Humans excel at habit behaviour even when their habits are bad habits, so most will manage to slide by as they have always done.

But a few will stick it out for longer and start to see the benefits of their new financial resolution.

It is those few I will be there for, to help, advise and encourage.

I would love it if you were one of them.

Merry Christmas


The Road Back From Bankruptcy

Bankruptcy is a process where you are legally declared unable to meet your debts.  But this is not a course of action or a decision that anyone should take lightly. Firstly, you may not be released from all of your debts. Secondly, being declared bankrupt can permanently affect whether you can get credit in the future as your name will appear on the National Personal Insolvency Index (NPII) forever.

Your bankruptcy period is no picnic.  It is normally 3 years and 1 day but during that period you are no longer in control.  A bankruptcy trustee will be appointed to look after your affairs so you can’t do much without the trustee’s permission.

Depending on what you do for a living your employment may be affected.   If you are working anywhere in the financial industry it could be a problem to continue.  If won’t be able to continue as a director of a company and if you operate you operate a business as a sole trader or partnership, you will have to tell everyone they are dealing with a bankrupt.

Your assets including your home can be sold to repay creditors and you may well end up living in rental accommodation.  You will have the basics necessary to live, but nothing fancy.  You will not be able to travel overseas without the written permission of the trustee.

Moving on after you are released from bankruptcy may not be easy.  You may find it hard to do some of the things you used to take for granted.  You may find it difficult to borrow money and buy things on credit; and you may also find it hard to rent, get electricity, water or the telephone connected without paying a bond.  Your ability to operate a bank account may also be restricted or even denied.  Some jobs will be denied to you as well so you may have to retrain or consider self-employment.

So it means that you are probably going to be steered towards a cash economy; possibly responsible for earning your own income and paying cash for everything.  It’s actually not a bad thing because we encourage over-spenders to do this even though they are not in bankruptcy.  It is a simple way to live and makes buying decisions very easy.  If you don’t have the money, you can’t make the purchase.  This time of changed money habits is also a very good time to start budgeting.

Even though your credit record will be adversely affected for only 5 years or so as a direct result of bankruptcy, it is the fact that you are named in the National Personal Insolvency Index (NPII) forever that is the problem.  This is a publicly searchable register.  So financial institutions and prospective employers are going to have ongoing access.

Post-bankruptcy is a time where you are likely to need a lot of support.  It’s a tough journey back on your own.  Regardless of the physical restrictions and obstacles you face there is going to be some emotional damage.  Firstly, there can be some shame and embarrassment attached to bankruptcy because it is a very public process.  Everyone around you knows.  Of course, it also affects your spouse and other family members so relationships can be strained or broken.  Secondly, you will probably experience some loss of confidence so you may not feel like trying again.

So it could be a time for some new friends and new opportunities and a new start to life.  As the old saying goes, it could be the darkness before the dawn.  If you are struggling, please seek help.  There is generally community support available and in western suburbs of Brisbane you will find it through Facebook group 4074 Community & Beyond.  Just ask.



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Become Credit Card Savvy

Make no mistake. Credit cards are designed to keep you in debt forever unless you are wise to them.

How? The repayment terms are designed to encourage you to pay the minimum monthly payment only, thus opening the door for outrageous rates of interest to be charged (up to 20% and higher) on the bigger portion that you don’t repay on time. Next time you look at your statement, you’ll notice that the Minimum Monthly Payment and the Due Date are together and quite prominent.  However, you should be looking at the closing balance on your statement. That is what you should be paying back each month.

It is interesting to note that banks and card providers are only required to assess whether you can pay the minimum monthly payment, commonly 2% of your credit card balance, not the entire amount borrowed.  No doubt change will come but it is slow.

So if you want escape the credit card trap you must use cards as a Transactor, not a Revolver.

Just in case you foolishly considered yourself a valued bank customer, Transactor and Revolver are terms used in banking parlance for people who pay back their balance before the expiry of the interest free period each month, and those who don’t.

Transactors pay off their closing balance each month by the due date and hence pay very little for the use of the card. On the other hand, banks and card providers make a fortune out of Revolvers. If you are a Revolver, you don’t (or can’t) pay back your closing balance in full at the end of the month; which means you are paying interest on outstanding borrowings at a rate of up to 20% or more, depending on your card.

And then there’s the Constant Revolvers.  This is bank-speak for Revolvers who are unable to pay back the balance month after month, and sometimes year after year.  With a rapidly growing card balance, they tend to be in debt forever. It is often the case that new cards are sought to pay off the existing ones and credit card debt balloons out of control.

Meanwhile, interest on interest grows rapidly while ever you continue to maintain an unpaid balance each month.  For every month that you allow your card debt to revolve to the following month you interest is rapidly compounding at very high rates. As for your interest free period, that is lost in the month that you don’t repay the closing balance and in the following month as well.  It becomes irrelevant until such time as you pay off your balance and continue to do so each month.

If you are in the Revolver group, then you are more than likely struggling financially and suffering stress. The irony is that you and the other 40% or so of Australian households who fall into this category, form the customer group that contributes most to the banks profits and share price.