Holiday Savings: 12 Ways to Avoid Holiday Debt Hangover

The holidays are a time for goodwill, meaningful celebrations, and time with the ones you love. Unfortunately, it’s also a time when some people spend more than they intend, often racking up credit card debt or depleting savings.

In this article, we’ll examine holiday spending trends for 2022 to get the “what, who, where, and how much” of holiday shopping. Next, we’ll consider smart holiday savings tips so that you can give meaningful gifts and reduce the impact of seasonal shopping. After all—‘tis the season for peace and joy—not stress and regret!

Holiday Spending Statistics 2022

After a sharp dip during COVID-19, holiday spending has risen fairly steadily. Let’s look at some of the projections for spending this season, based on Deloitte’s annual holiday survey.

Total Sales

According to the survey this year, low-income shoppers are intending to spend 25% more than last year, after pulling back holiday spending last year. However, 37% of American households are reporting that they are in a worse financial position than last year. To do so, the survey reports people are more willing to cut back on non-essentials. Additionally, more people report wanting to purchase fewer gifts, which may translate to more quality purchases with a longer lifespan, something that can be good for overall spending habits.

Deal Hunting

Because of inflation and other financial uncertainty, it’s forecasted that up to 50% of consumer shopping will have occurred over Black Friday and Cyber Monday deals. People are looking to find gifts at the best prices possible.

Where the Money Goes

Based on consumer surveys, it’s estimated that individual consumers will spend about $1455 this holiday season, which is up from $1250 in 2018.

Interestingly, however, shoppers intend to buy about 9 gifts, which is down from last year’s 16 gifts. This indicates a rise in the quality of the gifts. In addition, there’s been a 7% increase in people choosing to buy experiences. And, to save money, it’s estimated that 32% of people will buy resale items. However, gift card purchases still largely dominate the holiday shopping game, with 76% of shoppers spending an average of $252 on gift cards this year.

Holiday Spending and the Holiday Debt Hangover

Unfortunately, along with shopping, it has become a holiday tradition to spend the first months of the New Year “paying off” purchases made during the holiday season. This is often called the “holiday debt hangover,” and can be a major buzzkill to the beginning of the year.

Black Friday, Cyber Monday, and Christmas/Boxing Day sales encourage us to “save” on an infinite number of purchases, from new coats to new cars. Of course, the focus is on spending, not “saving”!

According to a MoneyGeek survey, over a quarter of Americans regret their holiday spending from 2021. On top of that, 65% of holiday spending was made possible by credit cards. In fact, 41% of Americans put 90% of their holiday spending on credit cards.

For some shoppers, holiday debt will last far longer than the decorations and celebrations. The survey shows that by February 11, 2022, 40% of Americans had not yet paid off their debt from Christmas 2021. One fifth of the survey respondents carried a credit card balance the whole year, left over from holiday spending. So how do you avoid the holiday debt hangover and still give gifts to the ones you love?

12 Strategies to Avoid “Holiday Debt Hangover”

Sharing the spirit of the season doesn’t have to mean taking on debt or depleting your savings. Here are ten holiday savings tips for more holiday cheer and less stress:

#1: Set Your Holiday Spending and Stick to It

Budgets are like diets–no one likes to stick to them. However, in this case, we do recommend setting a holiday spending goal and sticking to it. Make a list of who you’d like to buy gifts for and how much you can reasonably spend. Then, knowing your capabilities, get creative with your gift-giving.

The idea is not to limit yourself. Instead, it’s to create some structure so that you spend what you have. Otherwise, you run the risk of paying credit card bills for months to come. And remember, take your time and do your research! You’ll make better decisions that way.

#2: Do Your Research

Do your research on both prices and (if applicable), the desired features, value, durability, and/or ratings of a product. Buyer reviews can be helpful, as well as a service such as Consumer Reports, which can now be purchased in more affordable monthly or annual digital formats.

When you have narrowed down the item or brand you prefer, compare your local discount club (such as Costco) with other store specials, coupons, and Amazon. Many of the specials are available online—no stampedes required. And now, holiday sales tend to last well beyond the typical Black Friday and Cyber Monday.

However, don’t go overboard. If you earn $75/hour, there’s no sense spending two hours researching a $100 microwave!

#3: Get Creative with Gift Giving

People love thoughtful gifts, especially if they are homemade. Instead of giving someone a $100 gift, be creative and find a way to give them a nice $25 gift instead. Consider giving something that you wrote, knitted, recorded, baked, or painted. These gifts often have much more meaning to the person receiving the gift, especially when it’s customized to their tastes and interests.

These types of gifts are often priceless, too, especially when they’re one of a kind, especially if you’re particularly skilled at something. And if you’re trying to stick to an equal budget for everyone, remember that your hours spent making something “count” as value, even if you spent less money on materials.

You can also involve your children in projects. Make gift-giving a family endeavor instead of a consumer activity.

#4: Communicate with Friends and Family

While too much communication may ruin the “surprise factor” for children, many adults can lower the stress of the holidays by simply communicating wishes and expectations openly with other adults ahead of time.

Suggest cutting down on expenses in extended families by choosing names from a hat, or having a gift exchange where everybody only brings one gift. That way, you only have to buy a gift for one member of the extended family, instead of ten or twenty! This is great for married couples with lots of siblings, let alone nieces and nephews.

Avoid spending more than you feel you should on a gift for a relative or friend (who earns twice what you do), anticipating they will buy you something nice (again) and not wanting to feel your gift doesn’t measure up. Instead, open up a dialogue about setting dollar limits or even gift alternatives, as in tips #3 or #7. By setting these expectations early, you can ensure that everyone feels good about giving and receiving.

#5: Avoid Using Credit

Studies show that most people are less likely to make purchases, when they pay with cash as opposed to credit cards. They’re also more likely to spend less money when they use cash. That’s because credit doesn’t always feel like “real money.” Former About.com Financial Planning guide Deborah Fowles explained in an article on The Psychology of Spending Money, “The pleasant feelings you experience when you purchase the item are disconnected from the unpleasant or painful feelings of making the payment when you get the credit card statement.”

Leave the credit cards at home unless you have a history of paying them off right away. Shop with only cash, checks, or debit cards and you’ll likely spend less and save on credit card interest. And if you’re online shopping, resist checking out with Apple Pay or PayPal, which make it easy to use your credit cards.

#6: If You DO Use Credit…

Use your lowest-interest option if you will carry the debt for more than a month. Only use higher-interest “rewards” cards (cash back, travel points) if you will pay the card off right away. Too many consumers pay more in interest than the “free” flight or hotel they are trying to earn by using rewards cards!

#7: Spend Time Rather Than Money

Ask your friends if you can exchange gift-giving for an experience instead. Propose a potluck, Christmas caroling, or a cookie decorating party. Spend the holidays creating memories rather than consuming.

You could say something like, “Would you be willing to try something new this Christmas? It’s easy for me to overspend, when all I really want to do is show the people I love that they are important to me. So I propose that we go shopping together, not for gifts, but for ingredients to a fabulous holiday dinner that we can cook and enjoy together! The truth is, I’d rather spend the holidays celebrating with the people I love than shopping for them.”

#8: Give Gifts That Count

You know how hard it is to shop for people who already have everything they need? Consider giving to a favorite charity in their name, adopting a family, or “thinking outside the gift-wrapped box” by making a purchase through Heifer, International. Yet that’s just MY favorite charity. You could ask your giftee what causes matter to them and make a donation in their name. Sometimes, you can even get a small gift when you “adopt”
a wild animal.

You might also have people on your list who could use the gift of financial education. Consider purchasing a book from The Prosperity Economics Movement such as Busting the Retirement Lies, Busting the Interest Rate Lies, or the newest Busting the College Planning Lies.

Experiences are also a meaningful gift to give, and allow you to spend time with a person you care for. Buying a membership to the Zoo, botanical gardens, or your giftee’s favorite museum can provide a year’s worth of fun. And these experiences are often educational, too. Maybe you know someone who loves to swim, and you could gift them a snorkeling lesson. Think about what your loved ones enjoy, and find ways t foster those interests with experience-based gifts.

#9: Separate “Wants” from “Needs”

A friendly reminder: When it comes to holiday sales, make sure you actually save money, instead of just buying more! You may think you saved $600 on the $1,800 computer you got on sale. But if the “saved” $600 doesn’t show up as a deposit in your bank account, you didn’t save it – you just spent $1,800! Since you can never “save” money on anything you weren’t going to buy anyway, be sure to separate wants from needs.

To avoid this, try not to purchase anything for yourself during the holiday season. If you want or need something, add it to your wishlist. This is the season for gifting, and you’re only adding to your spending when you purchase things for yourself, too. Allow someone to gift it to you. And if you really “need” it, you can purchase it for yourself at a later date. (And remember, most stores still have great sales year-round.)

#10: Don’t Do All of Your Holiday Shopping at the Holidays

It’s easy to get sucked into the black hole of holiday shopping, but remember that you can do holiday shopping at any time. If you know who you’re gifting each year (especially if you get #4 in order this year), you can pick up things they’ll enjoy throughout the year. By doing so, you can spread your spending across the year, which can help you avoid the holiday debt hangover. Twenty bucks here or there is much easier to spend with cash you have instead of credit you don’t.

By doing so, you also open yourself up to the possibility of getting more unique gifts. You may find something that catches your eye on a business trip or at an artisanal market that you wouldn’t otherwise find in the holiday crunch time between November and December. Just remember where you stash away these treasures!

#11: Shop Resellers, or Even Re-Gift

Re-gifting may be taboo. However, if you buy something and never use it, or are gifted an item that would better suit someone you know, re-gifting can be an excellent way to reduce spending AND waste. For example, maybe you have a subscription box and get products that you don’t want. Save them to gift for later! Just be sure the end recipient would actually enjoy the gift (and that you don’t give something back to the person who gifted you in the first place).

In addition, resale is a huge market these days. There are many “collectible” things now that go out of stock and end up on resale sites like Poshmark, Mercari, eBay, and more. While some resale items can be far more expensive, there’s the potential to find great deals on items. Just make sure to get things in “like new” condition. If you’re purchasing something in used condition, it might be worth discussing with the recipient. Some “collectors” don’t mind used, if it’s an item they want. However, a used item might not send the right message to the average non-collector.

#12: Lastly, Practice Healthy Savings Habits Year-Round

Even the best financial intentions can get derailed or delayed during the holidays. But it doesn’t have to be that way! Holidays are a breeze when you follow our holiday savings tips and use good financial practices every season:

• Live below your means. The most important rule of healthy money habits is to earn more than you spend.
• Save regularly and automatically. “Pay yourself first” with automatic payroll deductions or automatic deposits to savings accounts.
• Set aside extra for holiday spending in advance. To avoid going into debt every Christmas season, budget and save a little extra every month. It’s easier to save $100 a month than come up with $1,200 all at once.
• Structure your life insurance to optimize cash flow. High-cash value whole life policies are an efficient way to save for emergencies as well as opportunities because you can get policies that “double” as savings, protection, even long-term care insurance with the proper riders.

With many aspects of financial management, you delegate or get help from accountants, bookkeepers, tax preparers, insurance agents, financial advisors, estate planners, etc. However, SAVING is the one thing that nobody can do for you!

If you can master the art and discipline of saving year-round, the opportunities for wealth-building are limitless. Making a habit of saving and give your family the gift of financial stability every year.

Keep your eye out for news from us on our upcoming offering–an app that will help you save first, and do it automatically!

Prepare for a Happy and Wealthy New Year!

Is it time to establish new habits for a more prosperous, stress-free life? Are you looking for savings and investment vehicles insulated against the instabilities of the stock or housing markets? Contact Prosperity Thinkers—we’d love to show you a different path.