You’ve set a goal to get rid of your credit card debt. Now let’s understand why you ran up that debt in the first place – and how you might prevent that from happening again.

If you’re always running up credit card and other debt, you’re spending too much – by definition.

As Charles Dickens’s character Mr Micawber said, ‘Annual income twenty pounds, annual expenditure nineteen [pounds] nineteen [shillings] and six [pence], result happiness. Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.’

Why do you do it? Because you want stuff and experiences. They make you feel happy at the time.

Think about it, though. Once the new jacket has been in your wardrobe for a few months, or the memory of the meal has faded, you’re often no happier than before you spent that money. You bought a short-term glow with long-term gloom.

I’m not saying that applies to every purchase. We can all look back on certain holidays or concerts with great pleasure, or point to items in our homes that we’ve loved for years. But those are the standouts. So much of what we buy just becomes the new ordinary.

Next time you buy a treat, note in your diary to assess a month later – and a year later – if the purchase has made you happier.

Another reason you might spend more money than you have is to keep up appearances. Your friends have certain clothes, cars, holidays, whatever. You don’t want to look like the poor relation. But think about it. Do your friends care if you don’t ‘meet the standards’? If yes, how genuine is the friendship?

Some of the professional people written about in the fascinating book The Millionaire Next Door, by Thomas J. Stanley and William D. Danko, had put themselves under huge stress to look good. It’s a pretty stupid way to live your life.

Back in 2008, the Families Commission said in its Beyond Reasonable Debt report that a person is more likely to get into debt if they:

• feel they are not in control of their own life and actions
• base their aspirations on comparison with others
• have poor self-control and a tendency to be impulsive

I doubt if that has changed.

I spend about um ...

Here’s a trick. Write down estimates of how much you spend in different categories. They might include: food, clothes, transport, housing, entertainment and so on. Then keep track of your actual spending for a month or two. Where there’s a big difference between the estimate and the actual spending, that suggests where you could cut back.

Warning: You might learn something you don’t like! An Australian study found that most people estimated their spending on transport and rent fairly accurately. But they spent more than they thought on clothes, considerably more on booze, and way more on gambling. Funny that.

The Christmas trap

Christmas – and the holiday that often follows – mean credit card spending often gets out of control.

A 2017 survey found that 15% of New Zealanders have more than 11 people on their Christmas list to shop for. And about 27% (more often women) said they planned to spend over $200 per child on presents. Meanwhile 15% (more often men) were spending more than $200 on their partners.

In sum, 17% expected their total household spend on Christmas to be more than $1,000 – on food, travel, presents and decorations.

It’s hardly surprising that late credit card payments reach their peak in January, February and March each year.

Ask yourself: Do you really enjoy buying, giving and receiving, or is the family gathering more important? Are children happier with more presents but stressed parents?

Other ways to do it:

• Draw names out of hat and each person gives to just that family member whose name they have drawn.
• Set a low dollar limit for presents.
• Give to the kids only, and teens get $20 each.
• Switch to giving presents for birthdays only. Make a bigger deal of each person’s birthday.
• Family members all put money into a charity.

Free up time and energy to concentrate on good (but not necessarily expensive) food, and the family having a fun time together.

© Rich Enough? A Laid-back Guide for Every Kiwi by Mary Holm

Published by HarperCollins New Zealand