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| Adrian Mastracci, investment counsel at KCM Wealth Management, says “Perhaps, our gift to someone we know is to gently reinforce the idea of staying within our means. One gift surely to be treasured. If not now, at a later date." |
For Immediate Release
Vancouver, BC (December 1, 2003): The merry season of joy is sneaking up on us again.
Adrian Mastracci, investment counsel at Vancouver based KCM Wealth Management says, “This is the renowned time of the year when considerable consumer debt is incurred. The time of year when some finances get stressed and stretched to the max. Often resulting in credit cards creeping well past their safe limits.”
“The dreaded January moments of reconciliation are painful,” notes Mastracci, “So let’s reflect on the season of merry credit.”
“People love to be generous. However, the well intentioned generosity can lead to some frightful financial moments. A frosty thought indeed,” adds Mastracci.
“Those who spend a little more than they can afford don’t do it intentionally,” remarks Mastracci, “As we know, stuff often happens.”
“Perhaps, each of us can attempt a kind and gentle word of wisdom with someone that may fall prey to the financial hazards of their generosity,” proposes Mastracci, “Trusted friends can add some perspective on an otherwise frosty topic.”
“Being the good samaritan is not an easy mission,” mentions Mastracci, “The first task may be to listen carefully.”
“We will also need plenty of understanding and empathy. So, let’s muster the most tactful approach,” states Mastracci, “Our concerns may not be always welcomed. Nevertheless, let’s give it a valiant try to be helpful.”
“In the greater scheme of things, incurring non-investment debt is a huge impediment to accumulating the nestegg,” points out Mastracci, “Some sage advice is not to overindulge in debt of any type. Especially the high priced credit card debt.”
“There is enormous pressure on paycheques,” says Mastracci, “Some have incurred debts beyond their comfort zone, along with the never-ending stream of payments. Perhaps, even flirting with financial ruin.”
I'm reminded of one of my favourite commercials about a father and son conversation: "….Just because you have cheques in your chequebook… doesn't mean that…"
Therefore, some wise guidance to pass on:
- Establishing a reasonable allocation for the merry season and trying hard to stay within the guidelines.
- Sometimes, a personally owned stock or mutual fund (outside the RRSP/RRIF) may be sporting a loss. It may be time to take the medicine, selling it and using the proceeds to reduce a loan or credit card debt.
- Arranging a line of credit and transferring outstanding credit card balances to it. The rate is likely to hover around prime plus 1% to 2%, versus the 18% to 20% for many credit cards. Moreover, applying the interest saved to repay the loan principal really pays off.
- Making the minimum payment on credit cards is a mug’s game. At rates in the 18% ballpark, it will take a lifetime to pay off the outstanding balances.
- Minimizing the use of high interest rate credit, such as credit cards, takes discipline. Switching to a lower cost loan makes sense, but it's wise to resist the temptation to run up the cards again.
- Carrying the actual cash earmarked for the purchases may be the better choice instead of using credit cards. Especially, for those who have doubts the card balances will be paid off in January.
- Budgeting may be a little foreign. However, squirreling away an affordable amount each month into a “gift fund” for use during the gift giving occasions can be a financial saviour for next time.
- Reviewing the effects of rising interest rates on loans coming due in the next three years may help. A consolidation or refinancing of existing loans may reduce the interest costs.
“The wise and responsible use of credit, especially during these times of merry, is important to managing financial health,” suggests Mastracci, “Resolving to improve the situation by avoiding the common pitfalls of easy credit is a wonderful gift.”
“Ultimately, the individual has to set the suitable credit boundaries. Using good judgement assists in staying out of financial trouble this merry season,” explains Mastracci.
“Perhaps, our gift to someone we know is to gently reinforce the idea of staying within our means,” concludes Mastracci, “One gift surely to be treasured. If not now, at a later date.”
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