Thousands of Utahns are enjoying the Christmas season — by shopping to their hearts’ content. Gift-giving and shopping are certainly part of what makes the holidays a joyful time of year.
That is, if the shopping and spending are done within reason, staying within a prudent family or individual budget.
Holiday shopping is expected to be robust this year, and that’s very good for the economy. In fact, economists look at holiday spending numbers as they evaluate the strength of the economy at year’s end.
Spending during the holiday season is a key measure of how much confidence consumers have in the economy and in their own finances. If we feel good about things, we tend to spend a bit more.
Holiday shopping is also important because it provides a big boost to manufacturers, retailers and distributors — and the millions of people they employ. For some retailers, holiday sales represent as much as 30% of total yearly sales.
However, if spending results in excessive debt, what should be a good thing turns into serious trouble for individuals, families and society in general. It’s fun to spend in December, but the credit card bills will surely show up in January.
As a banker, I am a strong proponent of prudent use of credit. The ability to wisely borrow often determines success or failure in a small business. The enormous blessing of owning a home is usually only possible because an individual or family can use debt to make the purchase. Used properly, credit is a good thing for families, businesses and society.
But too much debt can destroy businesses and individuals.
For example, if we are borrowing for large capital items that we pay off as we use them over a period of years, and the payments fit well within our monthly budget, then we are using credit wisely. That’s especially true when “investment”-type borrowing and spending help us earn more money by getting more education, or by building wealth in a home or business that increases in value.
But if we are borrowing to pay for day-to-day needs like food, clothing, utilities, and even to pay off other loans, then we know we are in financial trouble. If we have debts, especially credit-card debt, and have difficulty making even the minimum monthly payments, then we are in serious trouble and we need help. We should get involved in a program to get our finances in order. That’s always a good goal for the new year.
A quick Google search provides ample guidance on developing good borrowing habits. Zions Bank provides numerous tips and suggestions at our online Personal Finance Center.
Being a wise shopper and user of credit essentially comes down to exercising discipline, using a budget and not spending or borrowing more than we can afford. The holiday season, with its pressure to spend, is an excellent time to practice being disciplined and prudent.
It’s also a good time to teach young children the beginning principles of financial management. By giving them a set amount to spend on gifts, they will learn to prioritize and use a budget. They will begin to understand how much things cost, and will learn discipline as they try to make the most of the money they have available.
It Is critical for young people and consumers of all ages to understand the importance of earning and maintaining a good credit rating. A poor credit score can impact financial stability for years into the future.
Let’s make this holiday season especially happy by spending wisely and avoiding excessive debt.
A. Scott Anderson is CEO and president of Zions Bank.