Holiday Spending and Staying Out Of Debt

Happy HolidaysAre you ready for the holiday rush and buying spree? Traditionally, the holidays bring us a time of sharing and giving. But the cost of giving has increased over the years and you need to be aware of the burden it could put on your financial situation. With the change in most individual’s financial situation over the past year, this is a good time to reevaluate your holiday gift giving.

Most families spend around $500 on holiday gifts. If you put all those gifts on your credit card, the end result may surprise you. Do you have any idea how long you will be paying off those holiday gifts if you can only make the minimum payment each month? Let’s do some math:

$500 of holiday gifts: Let’s say you charge $500 on your credit card and only make the minimum monthly payment of $20. Some credit cards now are around the 19.99% interest rate for long period payoffs, you will be paying on those holiday gifts for 3 years! And to top it off, you will be paying the credit card company an additional $153 in interest (see Federal Reserve website –

What if your gifts top the $1000 mark: Now you have an after-the-holidays credit card bill starting at $1000, with the same $20 of minimum monthly payment and 19.99% interest rate. Are you sitting down? It will take you 9 years to pay off those gifts you purchased! The credit card company will be happy because you will pay them $1,167 in interest. Yes, that is correct you will be giving $1000 worth of holiday gifts to your friends and family, plus over time more than a $1000 gift to your credit card company.

Not to be a Scrooge, but there is a downside to credit card use if you can not pay it off in a month or two. Another option is the cash envelope and gift list method. Make a list of people you will be buying for, a dollar amount for each person and some great gift ideas you know they will love. Now hit the mall with list and cash envelope in hand. Your goal is not to purchase more than you have in your envelope.

A last tip to remember: the holidays are not always about the purchased gifts. Think back on all the unwanted, unneeded or forgotten gifts you have received over the years. If you were able to have something different from the giver, what would it have been?  What were the best holiday gifts you have received? Was it the homemade cookies, the framed children’s art work or just being able to spend time with your family and friends? The holidays are truly about sharing and giving; think about using your heart and mind instead of your credit card. Have a Happy and Financially Safe holiday!

Kimberly J. Howard, CFP®, CRPC® is a Certified Financial Planner and the owner of KJH Financial Services, a Fee-Only practice located in Newton, MA and Denver, CO (781-413-4879). Please visit us at or email Kim at

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Credit Scores 101

Women and Credit CardsMost people have credit cards. Your credit score matters, so don’t take it for granted. And if it is low, here are ways to give it a turbo boost.

The most commonly used credit score is from FICO, and it is vital to your financial health. Fair Isaac Corp. created the FICO credit score in 1958, and it has stood the test of time. By the company’s measure, scientific analysis and calculation, the highest score is 850. Congratulations to all of you are at that level.

However, most people’s score does not reach those heights. Each lender has its own way of interpreting the score. Most lenders agree that any score above 750 is excellent, around 650 is fair and under 600 is poor. The closer you are to a 750 score, or above, the more likely a lender will approve you and charge you lower interest rates.

The first and most important is to pay all your bills on time. Late and skipped payments can really hurt your score. Next, keep balances on credit cards as low as possible. Paying off debt is a much wiser choice than moving debt from credit card to credit card.

Pay off the credit cards with the highest interest rates first. Every time you apply for and open a new credit account, your score goes down, so be wise with those applications received in your mailbox. Raise your score by maintaining having balances lower than your credit limit.

Your FICO score summarizes your credit risk and is based on your credit report. You must request and inspect your credit report at least annually. Each year you can receive a free copy of your credit report from There are a number of other websites that say you will receive a free credit report, but if you have to provide a credit card to get a free report then it is not really free.

Only this site provides no-strings-attached reports. Reports are provided from the three major credit reporting agencies (Equifax, Experian and TransUnion). Once you have your reports in hand, do not stop because you still have work to do.

Verify the reports and determine if there are inaccuracies. Clear up anything that is not correct by contacting the credit reporting agencies with the correct information. Inaccurate information can lead to denying you credit or paying a higher interest rate.

The ideal person, in the eyes of the credit bureaus, is someone who holds a job for some time, owns a home or rents an apartment for several years and holds just a few cards that are paid on time. They also like those who carry some balances, usually 30% or less of the credit limit, because card issuer make money from interest payments.

A low credit score can cost you significant time and money. Get a higher score for a winning financial life.

Kimberly J. Howard, CFP, CRPC, ADPA, is the owner of KJH Financial Services, a fee-only practice located in Newton, Mass. (781-413-4879). Please visit her at or email Kim at

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