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The Companion Advisor: General Interest
Still coping with Christmas debt?

By Eve Brouwers
A Companion Advisor article

“Ok. don't panic. Don't panic. It's only a VISA bill. It's a piece of paper; a few numbers. I mean, just how scary can a few numbers be?"

- From CONFESSIONS OF A SHOPAHOLIC by Sophie Kinsella.

Facing up to the bills of 2007 can be a paralyzing experience for some. In her book Confessions of a Shopaholic, Sophie Kinsella’s character Rebecca Bloomwood tries to make peace with her overspending-self. It does make for humorous reading but the similarities to real life make it sadly tragic. After 25 years in financial services, I’m afraid I have run into more than my fair share of real life shopaholics.

I have learned a long time ago that people do exactly what works for them. On the surface, it may not look like it works: however, some part of a person’s psyche is achieving exactly what they need to survive. It is in the understanding of these hidden needs that the real change can begin. The start of 2008, is the perfect time to get one’s financial house in order.

Here are some quick signs that you might need to read on:

You avoid opening your bills;
If you do open your bills, you are surprised by the outstanding balances;
Hiding new purchases or secretly cutting off price tags; and,
You feel hopelessly in debt and overwhelmed by the magnitude of what you’ve spent.

Despite the quick rush you might experience when buying that new “just-gotta-have-it” item, the long-term effect of overspending is dragging you down. How many times have you said that you just have to stop spending money? This behaviour, if left unchecked, will get you one place – BROKE!

Today’s pop psychologists suggest overspending, much like overeating, is a symptom not the cause. In other words, you must understand why you are overspending. Although I’ve heard 50% of the solution is in defining the cause, I believe this percentage too low. Regardless, if one opts simply to change behaviour, there is a good chance another will pop up to take its place.

Why do you do it? How will you change it?

To change, you must look deeply into yourself and truly understand what is at work. It takes some tough questions and time to get to the issues. Make a commitment to deal with the underlying issue. Once you get there, the solution has begun and it is time to get down to fixing the behaviour.

What part of your spending is working for you and how?

Let’s face it, people only do things that work for them. If the ramifications are immediate and punishing, they quickly stop. If the correlation between behaviour and the consequence becomes diluted by too much time, it may be more difficult to change the behaviour. Remember, quick hits, shortsighted behaviours may get you over a psychological hump but the long-term fallout can be catastrophic.

From a financial planning point of view, credit card debt should be a debt elimination priority as it represents the most expensive money available. Part of your strategy may be to consolidate your debt but if you do this, don’t forget to remove the credit card from the equation or you will find yourself in deeper by year’s end.

What things must you remove to ensure your success?

Identify and remove the triggers and tools you use to get the quick hit. Consider the tools you use to overspend. The most obvious are credit cards. Why not move those nasty little pieces of plastic to a place outside of your wallet or purse. Better yet, just leave them at home! If you find yourself unable to control your debit card purchases, start using cash. Does the Shopping channel have you spending? Program the channel out of the TV’s channel list: no flip, no slip.

Write your objective.

Your objective, driven by self-examination and personal desire to change or possibly by an external need such as the credit card company itself, must define clearly what, when, how and why. In terms of credit card bills, you might consider this objective:

To control credit card buying and use money effectively by paying off new credit card purchases each month and reducing the outstanding balance to zero by (insert date).

This is an easy to measure objective and one to consider and construct carefully. Look at your repayment capabilities before choosing a date. Treat your credit card as a debit card. Decide before the month begins how much you will spend and then stick to that amount.

Success is yours for the taking.

Plan, plan, plan your success and measure as you go. Don’t wait until the zero balance date comes along to measure how you are doing. Break it down into small steps. If you find you miss one month, don’t give up: just work harder next month and know you have less to spend because you overspent the previous month. Giving up is not an option: take control. 2008 is a new door through which we passed and the start of your best year.

For more assistance in understanding credit and its management, read through the Credit section of our Learning Centre.

This article was published in 2003 and updated in 2008.

Eve Brouwers is a successful management consultant and business strategist working within financial services for the past 25 years. Her hallmark no-nonsense methods make her the consultant of choice when businesses want to get serious about results. Eve can be reached at Nautical Consulting Group email contactncg@sympatico.ca.

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