A reader is upset that her otherwise thrifty boyfriend goes crazy at the end of the year.
Question: My boyfriend is driving me crazy. He agreed that we would both tighten our belts so we can save to get married and get a house and start a family. For the most part, he has been good about this. Then the holidays roll around.
He believes you need to spend a lot of money on gifts for everyone. When I remind him of our plans, he says, “But these are our friends and our families, I’m not going to be a Scrooge to the ones I love most!”
He also says it’s no big deal to run up our credit cards, because we can make the minimum payments, as little as $15 or $25 a month. If it gets really bad, he says we can sign up for programs that will cut our monthly payments by half. And if THAT fails, we can declare bankruptcy and just start over with a clean slate.
I know he’s full of it, but I don’t have the facts to explain it to him. Can you? He’s a good man the rest of the year, but the holidays might actually break us up.
— Katrina in Michigan
Howard Dvorkin answers…
The holidays are marketed as a time for families to come together. Sadly, I’ve seen them rip families apart — precisely for the reasons you just described, Katrina.
Your boyfriend proves that a little financial knowledge can be a dangerous way to live. Let me give you the facts…
Minimum payments equal maximum cost
For Halloween, Debt.com compiled an interactive map called Credit Hell. It shows you just how long it takes to pay off the average credit card balance if you only make minimum payments, and it’s broken down by state. For Michigan, it would take 16 years and four months — and in 35 other states, it takes longer.
When you make minimum payments, you rack up huge interest charges. Sure, you don’t have to pay up right now. You will pay even more later.
DMPs are effective but not easy
When your boyfriend mentioned cutting his monthly credit card payments in half, he was most likely referring to a debt management program. Called a DMP for short, these are administered by nonprofit credit counseling agencies and can reduce your payments by 30 to 50 percent. They’re powerful tools, but they’re not panaceas.
I suggest you consult the Debt.com report, Debt Management Program Pros and Cons. One big con: You can’t open any new credit cards while you’re enrolled in a DMP. That makes sense, because credit card spending is what got you into trouble in the first place, but there are similar restrictions you need to know about.
Bankruptcy is serious business
Likewise, I suggest you read — or insist your boyfriend read — The Pros and Cons of Bankruptcy. From student loans (which aren’t discharged) to your credit score (which will take a hit), bankruptcy is a last resort. Thinking of it as an easy way out is like driving your car recklessly because, “Hey, I have airbags to protect me if I crash!”
Have a debt question?
Email your question to firstname.lastname@example.org and Howard Dvorkin will review it. Dvorkin is a CPA, chairman of Debt.com, and author of two personal finance books, Credit Hell: How to Dig Yourself Out of Debt and Power Up: Taking Charge of Your Financial Destiny.
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Article last modified on October 9, 2018 Published by Debt.com, LLC .