It's us versus them

Roger Schlesinger
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Posted: Oct 26, 2006 12:00 AM

Let me start this article by saying that there isn't a doubt in my mind that we are the good guys, wearing the white hats, and they are the scoundrels, aka the "bad guys". I am sure to turn a deaf ear to those arguing the other way, because it isn't correct. Now that I have the two sides identified, we can begin to make our case. And we will!

Checking the date on the calendar, October 26, one can readily see that Halloween hasn't yet arrived, albeit very near, and that our attentions are already diverted. To what, you say? Have you not been to your local merchandising establishment? To that other part of the Holiday Season – the one where we as a nation commit financial suicide each year? Of the massive record credit card debt weighing down our citizens, I dare say that the vast majority of it was run up in the months of November and December. And why, you ask, do we do this? We are enticed, cajoled, harassed and made to feel unpatriotic, irreverent, cheap and "scrooge like" by “them” – the retailers of America – if we do not fall lock step behind our neighbors and start shelling out cash like it grows on trees (with deference again to the farmers).

I make light of the situation because it is so serious, and the people who are the worst offenders and the least able to afford the Holiday Season turn a deaf ear to suggestions that they must change their financial habits. So I am trying to sneak up on them. I do realize that the Holiday Season is now a significant part of our country's Gross Domestic Product. For many retailers, a good or poor season makes or breaks their year. And taking it another step, I know that a lot of people and pension plans invest in the stock market, and the Holiday Season affects their fortune, as the various companies report their earnings in January and beyond. My feeling is, so what? Are people supposed to sacrifice their financial future for the common good of some of their neighbors?

Credit cards are the most expensive installment debt in the world. I have said it before and I will continue to say it. One of the reasons is that they weren't set up to be paid out over a long period of time. They were set up to extend credit until the end of the month. A lot of things that were set up or invented in the past have been misconstrued or simply changed over time, and this is just one of them. Credit card companies are not only willing to raise their rates at will, but also to extend your credit limits with the wink of an eye. If you think retailers are gearing up for the big push, it pales in comparison to the credit card companies. It reminds me of my old friend Stan Freberg's record of yesteryear "Green Christmas".

Regardless of your religion, I do not believe spending till it hurts falls under any of the teachings of the faith. I doubt that anyone confuses the directive to "give as much as you can" with the aforementioned behavior. Why do it? Why ruin the first part of every successive year with budget busting buying, yielding incredibly large bills?

STOP!

Do it for cash or don't do it. That is the directive this year and let me show you the good it will do. First of all if you stopped using credit cards, and if everyone did, credit card interest would plummet. They would have to lower the rate to entice customers. The interest rate on your old balances will get lowered as well or you would simply transfer them to another card. This is a big win for everyone but we are not finished.

Your need for cash may lead you to your house( See "Building my bank" Sept 26) and force you to look at your current financing, and your other current debts. Careful analysis might show you that there are large savings available to you if you take the proper steps to refinance your debt. You might find you can pull out sufficient money for the holidays and reserves, shorten your amortization and save money on your total debt each month. (Read "How good is this?" September 19)

Your new found ability to exercise monetary restraint will yield you many rewards.

Your emphasis will be on how to invest your excess money instead of how to make your income cover your excess debts. You will feel a sense of freedom you haven't felt probably since the day you declared yourself to be your own person. That probably happened when you graduated from high school or college. It felt terrific but lacked both substance and conviction. (You had your success, you didn't have any baggage, but the other side of the balance sheet had only the word future.) This time it's the real thing.

Oh by the way if you are worrying about the credit card companies realize that you are one of the few who actually will do this. The rest of the bunch will be assigned to a 10 by 10 room and sentenced to listen to Green Christmas until they finally get it.