Your Guide To The Most Expensive Time Of Year

Christmas: it’s known as the most wonderful time of the year. There’s all that food to eat, drinks to toast, and gifts to exchange. It’s normal to splurge a little bit to celebrate the holidays, but in spoiling the people they love the most, many Americans do more than just splurge. They’re spending more than they should on the festivities, clearing out savings and charging the rest on credit.

Overindulging has become as much of a tradition as having seconds at dinner. While that extra helping of pumpkin pie isn’t great for your thighs, it’s those extra charges you make at the till that are truly harmful. After working hard to make merry, you can arrive in the New Year with significant debt. To beat the odds, take a look at this spending forecast and savings guide.

Americans are spending more than ever

Last year, Deloitte economists released the results of their annual holiday retail forecast, estimating the nation spent as much as $1.5 trillion between November and January. This was a 4.5 percent increase from 2016’s spending.

The National Retail Federation estimates to see similar growth in this year’s spending. Its 2018 economic forecast projects shoppers will spend as much as 4.4 percent more than they did in 2017. Matthew Shay, the NRF’s President and CEO, cites consumer confidence as the reason to expect such growth.

“A robust holiday season for retail sales is just one of many barometers that points to a consumer that is clearly feeling positive about their financial health,” Shay said.

Don’t be overconfident

There’s a difference between spending a little more because you have more expendable cash to spend on the holidays and spending a lot more because you have a few credit cards in your wallet. Yet, for a growing number of shoppers, it’s not obvious.

Holiday Season Spending

The NRF reported shoppers spent an average of $967 on items like gifts, decorations, and food during the holidays. The true cost is much higher when you add on entertaining and travelling at a time when most work fewer hours over the holidays.

According to MagnifyMoney, shoppers gained an average of $1,054 in debt over the 2017 holidays, an increase of 5 percent from the previous year’s survey. As much as 68 percent of respondents said this debt was held on credit cards, many of which had high interest rates. A smaller portion of shoppers (17 percent) racked up debt with store cards, while just 9 percent used a personal loan.

Holiday Debt

This debt hangs around like a bunch of mistletoe in a forgotten corner of the office. MagnifyMoney’s survey shows the majority of respondents (39 percent) will take more than 5 months to repay their debt. Another 10 percent of those surveyed said they would pay only the minimum payments.

Thanks to compound interest, this is a repayment plan that would take them until 2023 to clear their credit card balances, assuming they weren’t using it to charge additional purchases in the meantime.

Financial literacy is how you can avoid this fate

With spending on track to break records, it’s safe to assume holiday debt will reach new heights for 2018. With these odds, it’s natural to approach the holiday season with trepidation; they pose a significant financial risk for the average shopper.

They say it’s magic that powers Santa’s sleigh when he delivers presents to the 526,000,000 kids celebrating Christmas. Magic, however, is not to blame for the missing money in your wallet. Though it may disappear in the blink of an eye, it’s spent the old fashioned way.

The money you spend on the holidays is your responsibility. If you expect to celebrate the holidays without going into debt, you need to understand your finances.

Use a budget to see what you can afford

A budget will reveal more about your finances than any other financial tool. Whether you make it by hand or use a money management app to generate one for you, it will show you how you’re spending your money in an average month. Once you can track expenses and income down to the penny, you’ll see how much you can afford to spend on gifts before you turn to credit cards.

Commit to saving

If you create your budget earlier enough, you can start saving to increase how much you can spend on the holidays. Saving early is the best way to avoid using credit cards on Christmas gifts, but it can be a challenge if you’re still recovering from last year’s holiday hangover.

Saving on a small budget is all about sacrifices as you eliminate unnecessary spending from your budget. Chirs Reining, a man who retired in his 30s, suggests cutting out small things before you look at bigger expenses. Giving up takeout, cable, and your gym membership can free up considerable money in the long-term. Not only will it help you save for the holidays, but you’ll be able to create a larger safety net of savings that you can leverage towards making bigger money-saving changes in your life.

If you aren’t sure how you can cut out expenses on a small budget, don’t be afraid to seek out help. You can find budgeting tips catered to your limited finances by turning to lenders like MoneyKey. They have a resource center and blog updated with savings tips. Though you don’t have to be one of their customers to access this helpful information, they designed these tips with their online payday loan borrowers in mind. Those who secure online loans from MoneyKey typically don’t have a lot of flexibility in their budget, so the savings tricks are simple and straightforward.

It’s never too early to start thinking about the holidays. While many wait until December to start shopping, there’s strategy to starting as early as the fall. You can find deals on items as retailers switch over seasonal stock, and you’ll be prepared to take advantage of sales like Black Friday and Cyber Monday.

Avoiding debt is no easy feat, but it’s a lot harder than getting out of debt. Remember these tips as you navigate the holiday season. Understanding your finances can help you avoid overspending—which means you can arrive in 2019 without nursing a holiday debt hangover.


Anum Yoon is the founder and editor of Current on Currency. She loves all things personal finance, which is why you'll find her work all over the PF blogosphere.

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