How much do you spend on Christmas shopping? December has just begun, and many are already in debt because they took advantage of the Black Friday discounts that lowered prices, such as the bed and mattress that Antonio bought for his son – from $980 he ended up at $570 – or the folding cell phone that Ivette bought because when was listed at $1,400, and last Sunday it reached its last price of $880.

These purchases were made with a credit card that offers a two-month grace period for payment within 18 months during the Christmas season. Ivette didn’t want to get into such long-term debt, and that’s why she postponed her phone number for three months, but in the short term, they didn’t give her months of grace, so she will start paying off that debt this December.

Why are there difficulties with savings in Ecuador?

Although more money circulates in the economy at this time due to the payment of the thirteenth salary or bonus, the expenses in those months also become too high, so you end up spending much more than you have and thus start the year with debts. Therefore, it is important to take care of your money and avoid impulsive or last-minute purchases. A warning was given to those who participated in the conversation Managing my finances in December organized by Banco Pichincha this week.

There were recommendations for this trip:

For this, the 50-30-20 rule must be taken into account. These are the percentages for the distribution of the salary: 50% in fixed expenses, which are all basic and vital expenses, 30% for tastes and 20% for savings.

Of those three categories, where does credit card shopping fall? Well, that item would fit in 30% of consumable costs. If I buy something that I will start paying in February, I have to be aware that from that month the salary will no longer be complete because the amount must be set aside to pay that debt, and if there are more purchases, then everything must be added.

For example, in October, Mariana bought a set for the living room and a set for the dining room for 18 months with a two-month waiting period, and in November for a bedroom set also for 18 months with a two-month waiting period. Don’t buy anymore now because your 2024 will start with new debts: your October purchase will appear on your December statement to pay $200 a month from January 2024 to June 2025, and in February, $60 will be added to your the second purchase that you will pay for by July 2025. So you will no longer have $260 of your salary for a year and a half, and you will have to continue to add to that the fixed payments that you make on your credit cards like a supermarket, Netflix and insurance.

All these costs must be included in the budget, which is one of the guidelines for how to take care of money at this time. In addition to reducing consumption (coffee, sweets) and being careful when using credit cards. When it comes to big purchases, they can be postponed, but not supermarket purchases because that spending is weekly or monthly and will accumulate and the debt will never be paid off, which is another key warning of financial education programs.

Prepare your personal finances now so you don’t outdo yourself at the end of the year and face 2024 with better economic expectations

Although delinquencies in consumer loans reached 5.28% in October 2023, an annual increase of 2.2% compared to the same month in 2022 – at the general level, delinquencies in banks reach 3.55% (an increase of 1.29% ) – periods cannot be compared.

This is because in 2020, due to the pandemic, a longer deadline for debt maturities was given, which was in effect until December 2022, “which is why the delinquency indicator had more flexibility”. From 2023, loan installments that are not paid on time, within their maximum repayment term, are transferred to the portfolio due on the 31st day, except for housing loans that are maintained on the 60th day, explains the Association of Private Banks of Ecuador (Assobanca).

“This change caused a slight increase in delays due to the change in accounting. However, this change makes it impossible to compare delinquencies between periods, since they are measured in different ways,” he adds.

However, the credit history of Ecuadorians is generally considered to have improved: there has been a recovery in the participation of Ecuadorians who meet their obligations accurately. As of September 2023, clients with the best credit rating, i.e. those with a score between 689 and 999 points, reached 71.38%, as of September 2022, that percentage reached 65.36%.