You would have to be a hermit not to know that, in the US, Thanksgiving marks the start of the holiday shopping season. We're assaulted by ads in all forms. TV, radio, internet, print all send the message that showing love = giving gifts even if we can't afford them. This message came through loud and clear when my mail was delivered yesterday. The pile of ads I received included a glossy, four page flier for a store designed to make big ticket, holiday buying "affordable" for everyone. This store offers "No credit checks, no credit needed - everyone's approved" purchase power for many of this year's most popular items. Do you want to get your sweetheart a digital camcorder, 57" HD TV or a laptop computer? No problem! A small down payment and equal monthly payments for 6, 12 or 24 months can make him/her gasp when they look under the tree.
This all sounds great until you start doing the math. You pay only $99.99 for a Garmin GPS and then continue to pay $99.99 each month for 6 months for a grand total of $599.94. The same model purchased at a local electronics store is $394.00. A brand name laptop computer with 1GB of ram and an 80GB hard drive is $159.99 with 12 more payments of $159.99 for a total $1919. The same computer purchased from the manufacturer is $749. Need I say more? This seems to me to be the retail version of the payday lender. They target those of us who just don't seem to get our paycheck to stretch far enough to satisfy what we want. I say "want" because I couldn't see one thing in this ad that would be able to be classified as a "need".
A marketing campaign like this is particularly frightening in the current economic climate. A recent article in USA today entitled "Housing Woes Have Domino Effect" warns that...
...tighter credit and falling home prices top the reasons why the economy could slip into a recession...
This same article included clips from an audio interview with Gary Schatsky, a New York based financial planner. Mr. Schatsky was asked how people could protect themselves from the impact of a credit crunch and a faltering economy. He suggests that it may be more important to manage debt rather than investments. Managing debt involves cutting down on expenses and that's not an easy feat when we're constantly being bombarded with the message to "buy, buy, buy". Perhaps a gift we can give ourselves is to develop a budget for our holiday gift-giving. This budget could include a holiday club or share account so that our holiday gift giving doesn't put us in the red for 2008.
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