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5.2 DO YOU KNOW WHERE YOUR MONEY HAS GONE?; CUT AND REDUCE CHRISTMAS SHOPPING EXPENSES.

Unplanned expenses (sometimes called miscellaneous expenses) are the main reason that households get deep into debt according to credit counselor Robert Bugai. He has seen the same story over and over. Families find themselves swamped with bills and with no idea how they got into this situation.

Unplanned expenses are slippery and difficult to grasp. Most people know how much they can afford for a house or a car or at the grocery store. But what do you do when the car breaks down? Or the dentist tells you that you need a new crown? Or a couple you've known for years has a silver wedding anniversary and you're expected to buy a present? On the other hand should you really worry about the cost of a fresh cup of coffee and a danish each morning? After all it's a great way to start your day and it's only a couple of dollars.

The way many people deal with these expenses is to charge them on a charge card and forget about them.

Let's take one simple example: suppose each Christmas you charged about $700 (a good average for Christmas) or you charged about $700 a year for that cup of coffee and pastry each morning on a charge card. Let's further suppose you only paid the minimum payment on the charge card each month. Suppose you kept buying breakfast or paying for Christmas presents this way year after year. After 10 years at 18% how much would you owe? How much interest would you have paid and what would your payments be like?

Using the example above, after 10 years you would owe: $4,795

You would have already paid in interest over 10 years: $7,687

Your payments the first year would be only: $14.80 per month

After 10 years your payments would be: $101.40 per month

And bear in mind that you still haven't found a way to pay for the Christmas presents you buy.

Robert Bugai found that couples thought they knew where their money was going, but in reality they didn't. When you buy a magazine here, a soda there, go to a movie, buy a new pair of sun glasses, how can you keep track?

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