“Oh, for the good old days when people would stop Christmas shopping when they ran out of money.”
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, racking up credit card debt or depleting savings.
In this article, we’ll examine holiday shopping trends and consider smart spending tips to stay on budget and reduce the impact of seasonal shopping. After all—‘tis the season for peace and joy—not stress and regret!
Seasonal Spending Trends
After a sharp dip during the Great Recession, holiday spending has risen fairly steadily. However, according to Gallup polls, seasonal spending still falls short of 2007 pre-recession spending. Let’s look at the statistics:
Total sales. Holiday spending this year is expected to top $1.1 trillion, a 5% increase from 2017, according to an annual consumer survey from Deloitte. The increase was attributed to increased consumer confidence, with almost half of the respondents indicating optimism about the economy, and low unemployment.
Online vs. in-person. Online shopping on the rise and is expected to account for about 57% of this year’s purchases, or $128 billion in sales, predicts Deloitte. That’s about a 20% increase from last year. Just over half of the respondents said they would shop Cyber Monday. Still, 9 of 10 consumers plan to do at least some of their shopping in brick-and-morter stores, according to consulting company PwC.
Shopping already? If you’re a holiday shopper, chances are, you’ve already started. According to Deloitte, 60% of shopping indicated their shopping would start before Thanksgiving, and four out of ten would begin on Black Friday, the day after Thanksgiving.
Where the money goes. Based on consumer surveys, consulting agency PwC estimates that individual consumers will spend about $1250 this holiday season. That breaks down into about
- $693 on gifts and gift cards.
- $361 on travel
- $196 on entertainment.
More than half of the gift spending will be for family members, while than 10 percent will be spent on friends. More than one-fourth of consumers—as much as half in some surveys—plan on spending on themselves as well as others. It’s not unusual for people to wait for holiday sales to buy themselves the computer or television on their wish list.
The biggest spenders. Consumer research from PwC indicates that the biggest spenders will be millennials earning more than $70,000 a year, who are projected to spend an average of $2,021. (Millennials who earn less than $70,000 say they’ll spend less than half that.) Men spend about $300 more than women, on average. Amazon Prime members spend more than those who are not, and suburban shoppers out-spend rural shoppers.
The group that spends the most? According to Steve Barr of PwC, “Last year and this year, we’ve seen millennial dads come out as the biggest spenders… This year, 89 percent of millennial dads said they will spend the same or more than they did last year.”
Credit Card Debt for Christmas?
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. 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”!
Nearly three-quarters of Americans say they fail to budget properly for the holidays, according to a Varo Money survey. For many, this means going into debt. Consumers who went into debt last holiday season racked up an average of $1,054 in new debt–about 5 percent more than last year, according to MagnifyMoney’s annual post-holiday debt survey.
For some shoppers, holiday debt will last far longer than the decorations and celebrations. Less than half (46 percent) of those surveyed planned to pay off their holiday shopping debt in three months or less. One quarter of consumers said it would take more than six months to pay off their holiday spending. Shoppers making minimum payments on such debt can easily spend 5 years paying off such a debt—along with an additional $500 in interest (assuming an APR of 15.9 percent).
10 Ways to Avoid “Holiday Hangover”
Sharing the spirit of the season doesn’t have to mean buyer’s remorse! Here are ten holiday shopping tips for more holiday cheer and less stress:
#1: Plan your holiday budget and stick to it.
Make a holiday spending plan, and follow it. Know what you can afford, and avoid impulse shopping. Make a list of names and either pre-select gifts or shop with a firm budget in mind.
Don’t wait until the final moments when you might be tempted to spend more in a hurry. We rarely make excellent spending decisions when rushed. Plus, it can be stressful!
#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 Coscto) with other store specials, coupons, and amazon.com. There are always fabulous Black Friday and Boxing Day specials, although we doubt anything is worth getting up at 3am to be trampled by strangers! Many of the specials are available online – no stampedes required.
#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. Involve your children in projects, make gift-giving a family project 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 a gift exchange where everybody only brings one gift. That can reduce your shopping list tremendously! Purchase cards and write heart-felt messages.
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.
#5: Avoid using credit.
Studies show that most people are less likely to make purchases, and more likely to spend less when they do, when they pay with cash as opposed to credit cards. That’s because credit doesn’t always feel like “real money.”
Leave the credit cards at home unless you know you can pay them off right away. Shop with only cash, checks, or debit cards and you’ll likely spend less and save on credit card interest.
#6: If you DO use credit…
Choose your lowest-interest option if you will carry the debt 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.
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 or Busting the Interest Rate Lies.
#9: Separate “wants” from “needs” (especially when it comes to shopping for yourself!)
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.
#10: 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 spending tips and use sound 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.
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.
Is it time to establish new habits for a more prosperous, stress-free life? Are your savings and investment vehicles insulated against the instabilities of the stock or housing markets? Find out more about Prosperity Economics and what it can do for you.