According to a 2017 survey conducted by mobile startup Varo, 74% of Americans say they often fail to budget properly for the holidays, forgetting to take into account the full range of holiday-related expenses such as last minute gifts, food, decorations and holiday outfits.
And then there’s always peer pressure. And according to a 2018 survey by Bankrate, two in five Americans feel pressured to overspend during the holiday season, with parents and middle-income earners feeling the most pressure.
Research shows that many Americans who rack up holiday debt do so on their credit cards. In a 2018 holiday debt survey conducted by Magnify Money, 68 percent of respondents put their holiday debt onto credit cards.
Debt on credit cards tends to linger past the holiday season. According to the Magnify Money survey, 49 percent of holiday shoppers surveyed said it would take five months or longer to pay the season’s debt off their credit cards. That means those shoppers would be paying off their 2018 holiday debt into May of 2019.
The statistics are even more alarming for holiday shoppers who are planning to make minimum payments on their debt. For example, it would take more than five years to repay a debt of $1,230 on a card with an annual percentage rate of 16.5%, if the cardholder was making minimum payments of $30 a month. That shopper wouldn’t be rid of his 2018 holiday debt until 2023.
Tips to Managing Holiday Expenses -
- Create a budget. Set a holiday gift budget that you can easily afford, and then stick to it by tracking your spending as you buy.
- Look for travel deals. Book your travel early and use online tools such as Expedia or Kayak to comparison shop. Try carrying on your luggage to avoid excessive fees and avoid peak travel dates where possible.
- Make a gift list. Make an extensive list of all family members, friends, teachers and more that you need to purchase gifts for so you can accurately define your budget, then set a specific amount you want to spend for each category of recipients.
- Track your spending. Return to your gift list and budget after each purchase to track your spending and make sure you’re staying within your financial limits.
- Pick a payment. Plan the way you’ll pay – cash or credit. If cash, start setting aside savings for your spending now. If credit, make a repayment plan to avoid carrying unnecessary debt into next year. If you need a new source of funds for the holidays, consider a seasonal job or suspending certain luxuries for a couple of months.
- Do it yourself. Where you can, get creative and give meaningful gifts instead of pricey ones or make your own gifts. From pictures of the kids to holiday treats, candles and crafts – there are lots of easy DIY options.
- Shop the deals. Pay close attention to sales ads and take advantage of big sale days such as Black Friday and Cyber Monday. Sign up for email lists of your favorite retailers so you receive notifications of exclusive discounts.
- Share hosting responsibilities. If you’re hosting a holiday get together with family or friends, consider asking guests to each bring a dish and if sharing gifts, consider drawing names instead of buying for all.
- Set deadlines for new debt. If you do incur debt over the holidays, manage it wisely by setting a deadline in the New Year to pay it off.
- Start saving earlier next year. In January, open a Holiday Club Account at your credit union. This will let you easily set aside money each pay period throughout the year, so you’ll be ready to shop more efficiently next season.