Christmas spending

Dec.08.06

It’s that time of year when we celebrate the birth of Christ and most of us plunge headlong into the spirit of giving.

If money doesn’t flow at any other time of year, it certainly flows in December. Just this week the government announced an increase of its seasonal work budget to a whopping $1.5 million. Banana farmers are getting close to a $500,000 windfall. Some private sector companies will be paying out dividends and bonuses to staff.{{more}}

Stores are enticing the consumer with glitzy advertisements and hard-to-beat deals encouraging them to spend, spend, spend. And we all do. Change the curtains, buy new appliances, paint the house, buy expensive hams and other delicacies, and splurge on the kids, friends, family, and loved ones.

As heart warming and the good-feeling that Christmas brings, one must ensure that it does not become like a bitter sweet pill. Like the candy, it should be sweet right to the core but some people don’t budget for January.

Pay day comes early in December, followed by the longest wait ever for the next pay day. People run out of money, they borrow from the next door neighbour, friend or family member. Early to mid January comes around with the first bill becoming due for the items bought on hire purchase in early to mid-December but pay day is nowhere in sight.

The food has not lasted as long as one thought and pay day is still not in sight.

Christmas – commercial Christmas – can also be a bitter time of the year if finances are not properly managed and almost everyone – except the wealthy – have suffered the post-Christmas blues and those who have learnt from their mistakes understand how to manage Christmas finance.

VAT savings

Last week’s SEARCHLIGHT played on words on its back page announcing anticipated gifts from the Minister of Finance whom we dubbed Santa “De Comrade” Claus in the form of income tax eases which should take effect January 1.

The extent of the concession will be known on Monday but the Minister of Finance said that for each $1,000 in income tax concessions, it cost the treasury $2.2 million. Whatever the extent, much money will be freed up in the economy which will become even more liquid from January. And by the time VAT rolls around in May there will be even more savings and more cash flowing.

Now would be the time for Vincentians to think carefully about what to do with the extra money. Financial planners will say that all of the extra income should be invested or placed in an interest bearing account or in shares. It’s wise advice.

But there are some people who do need the extra cash and will not be able to afford to tuck it all away and pretend it does not exist. This is understandable but it is also prudent that at least 10 per cent of it should be tucked away into a saving account or in a retirement savings plan, or in an appropriate insurance policy.

Though there is much fright in anticipation of VAT, this new form of taxation will benefit all Vincentians in the long term. Yes there will be increases in some goods and most services but the amount of savings to be had from reductions in other areas will outweigh the increases in the few areas.

A number of other Caribbean countries have taken the plunge into the VAT. Their experience is that in the first two or three months after its implementation things are rough and prices are high because the VAT is suddenly applied on top of existing prices. But when that stock runs out and the new stock comes in, price ought to fall. The price on large appliances should fall so low that it will be pointless in flying to Miami to shop. In fact, Miami should become expensive compared to local prices.

However, one has to guard against unscrupulous merchants who will seek to price gouge and rape the public.

There are two ways of combating this; one way is through government monitoring of prices by its VAT Unit and the second is good old consumer power. If one goes to a supermarket and the prices are inflated, not a problem. Put the items back on the shelf and go the supermarket up the street.

Now is the time to start recording the prices of items frequently bought and now is the time to start shopping around to see who has the best prices and the best quality. When VAT is implemented, check off the new prices against the old ones and if there are increases, just move onto the next store.

Implemented and managed correctly, VAT should lead to a very merry 2007 Christmas.