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Smart holiday spending - Tips to avoid debt

Smart holiday spending - Tips to avoid debt


By Andi Anderson

Despite financial pressures such as lingering inflation, rising unemployment, and higher interest rates on federal student loans, many holiday shoppers remain optimistic as the 2024 season approaches.

According to TransUnion's 2024 Consumer Holiday Shopping Report, 57% of shoppers plan to spend the same as last year, while 38% expect to spend less. However, data from LendingTree reveals that the average holiday debt in 2023 reached $1,550, the highest in eight years. Alarmingly, a NerdWallet survey shows that 28% of Americans are still carrying last year’s holiday spending debt on their credit cards.

“Holiday spending is a common way for people to land themselves in debt and financial stress. Some find themselves in trouble by rationalizing big spending and incurring debt during the holidays. This leads to paying for holiday spending well into the next year,” said Carol Ehlers, a health and human sciences specialist. To combat this, Ehlers encourages practicing Money Smart Holiday Spending.

Here are some effective strategies:

  • Set a Holiday Budget

Determine how much you can afford to spend without incurring debt. Experts recommend spending less than 1.5% of your annual income on holiday expenses. For instance, if you earn $35,000 annually, keep holiday spending below $525. Adjust your spending if savings fall short by prioritizing essential purchases.

  • Shop Intentionally

Avoid impulsive purchases fueled by the holiday spirit. Stick to a planned budget and resist overspending on gifts, decorations, and events.

  • Make a Detailed List

Create a gift list with specific amounts for each recipient. Research shows that planning reduces spending by 20% or more, making it easier to stay within budget.

  • Use Cash Over Credit

Spending cash rather than credit cards can help curb unnecessary expenses. Consider the envelope method: allocate cash in labeled envelopes for each person and stick to those amounts. If using credit, limit charges to what you can repay within a few months, choosing a card with low interest and fees.

For more resources, visit your local Health and Human Sciences Extension and Outreach center to explore workshops on managing bills, credit, and debt. Smart spending now can prevent financial stress in the new year.

Photo Credit: iowa-state-university

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