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How Long Will It Take the Average American to Pay Off Christmas Debt?

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In my home growing up, Christmas was a huge celebration.  My mom started putting up decorations the day after Halloween.  We had seven Christmas trees all decorated around the house.  These weren’t dinky trees either.  They stood at least eight feet tall and were decorated to the hilt.

 

Since my mom loves Christmas and everything that comes with it, we also enjoyed Christmas music along with the elaborate and extensive decorations.  It didn’t matter that we were almost two months ahead of schedule.  As a kid, I didn’t fully appreciate all of this Christmas hoopla until I moved out.  I then realized how much work it was to set up just one tree, let alone the Christmas wonderland that she created each year.  

 

Admittedly, we were very spoiled at Christmas.  There was no shortage of gifts, and of course, as a rowdy young boy, I loved tearing into each and every present.  I still remember when I was six years old and received a Nintendo for Christmas.  That was the ultimate gift in my eyes.  But looking back, I can’t even imagine how much money my parents spent on gifts for me.

 

Holiday Sales & Debt

The most recent holiday sales figures, which jumped nearly 5% to its highest sales levels since 2011, show that many other parents must spoil their kiddos as well.

 

According to MagnifyMoney, consumers who went into debt over the holiday season averaged $1,054 of debt.  Interestingly enough, 44% of holiday shoppers incurred more than $1,000 in holiday debt.  Even more shocking, 5% of holiday shoppers accumulated more than $5,000 in debt from credit card purchases.  

 

However, according to the survey, 64% of those who incurred holiday-related debt did not plan to incur it.  

 

Why didn’t American holiday shoppers stick to their original plans?  According to the mobile banking startup Varo Money, 74% of holiday shoppers underestimated the costs that they would incur.

 

Areas that caused people to go over budget:

  • 36%: Last minute gifts
  • 27%: Regular holiday gifts
  • 27%: Food
  • 17%: Decorations
  • 16%: New holiday outfits

 

This shouldn’t surprise you, but the issue of going over budget is especially prevalent for millennials, according to Colin Walsh, co-founder and CEO of Varo Money.

 

“Money is tight for everyone around the holidays and today’s millennials don’t approach banking and budgeting the way they used to,” Walsh said. “Many millennials are “hands off” — checking their balance on a weekly basis with a general idea of how much money is coming in and going out. As a result, many will find themselves dipping into savings when they accidentally overspend over the holidays.”

 

Accordingly, it shouldn’t be surprising that consumer counseling agencies see a 25% increase in the number of consumers seeking help in January and February, mostly from holiday purchases made in December.

 

“A lot of people get by, paying the minimums on their credit cards,” said Durant Abernethy, president of the National Foundation for Credit Counseling. “Add on the holiday bills and all of a sudden, those minimums are more than they can afford.”

 

Is all hope lost if you went over budget?

 

Not according to Courtney Jespersen, Consumer Savings Expert at NerdWallet.  She has researched and found that holiday shopping isn’t always complete after the holidays.

 

“Stay on top of your purchases,” she said. “Continue to watch princes of the items you bought even after you shopped. In some cases, you may be able to get a refund for the difference, depending on your card’s price protection feature. Getting some money back could alleviate the sting of blowing your Christmas budget.”

 

Now is the time to set up a plan to pay down your debt.  This means utilizing the Debt Snowball method.  List your debt balances, lowest to highest, and make a plan to pay it off.  

 

Derek from Life and Finances has an incredible Debt Snowball tool, if you’re looking for a way to start paying off your debt.  

 

Preparing for the Next Holiday Season

Finally, Nancy Dunnan, author of “How to Invest $50 to $5,000,” advises,

 

“Use this as a heads-up for next season. Figure out what you spent last year and try to put aside some money each month so you’ll accumulate that amount by next Christmas… If it’s more than you can afford to set aside, then maybe you need to cut back on Christmas spending next year. Certainly friends and relatives don’t want you to go into debt for the holidays.”

 

So readers, did you go into debt this holiday season?  Did you spend more than you intended too?  Share your thoughts below.

Comments

  1. Hey MSM! Thanks for sharing my debt snowball tool. I love how useful it has become for everyone!!

    To answer your question above, we did not spend more than we intended on Christmas this year. We planned on roughly $500, and came in right at that number. It’s really not that hard if you know who you’re buying for and how much you like to spend for each person.

    Great stuff on this site! Keep it up!

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  2. The holidays mixed with not having a strong savings amount or not savings a bit each month to handle the extra budget in December leads to debt? Wow!

    The sad thing with going into debt for this is the most likely used Credit Cards to do it, meaning that the interest rates are most likely 20+ APR.

    In our family, we stopped doing gifts for everyone because of the amount of money and stress it causes on everyone – instead, we just do a small gift giving game and enjoy each others company (the real gift of the holidays)!

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  3. We used to fall into the Christmas debt trap. After going into debt one year to the tune of $600, we had enough. We started using a rewards credit card for all of our expenses. Now we use the cashback rewards to pay for Christmas gifts without going into debt. 🙂

    Another way is to put aside $50/mo the entire year to go into a Christmas fund.
    Mrs. Picky Pincher recently posted…What A Frugal Weekend! January 7My Profile

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    • Thanks for sharing Mrs. Picky Pincher!!! I definitely agree that you should budget for your Christmas fund each year. It definitely makes it so much easier and allows you to stay out of debt 🙂

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  5. My philosophy is to only spend money that I have earned. I just don’t feel right if I don’t have the money and try to present the image to others that I am well off. I wouldn’t try to give something that I don’t have. If you are over spending and it’s on your credit card, you’re just giving away your financial future.

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  7. Your Mom sounds just like Mr. College Rental’s Mom! Cutting back on Christmas spending was tough for my husband because his side of the family spends a lot on Christmas.

    This year we spent about $650 total on Christmas gifts. That was a little more than we intended, but we did not go into debt to do so. Our kids are where we spent more than we’d planned.

    I cut down some on costs by making a couple of gifts for our family Christmas party. We made birdseed cookies cut in Christmas shapes and pretty bags of spiced nuts. They made inexpensive gifts and the kids had fun helping out!

    We also save some money each month into a special “Christmas gift” savings account. That way we aren’t trying to squeeze Christmas gifts into our November and December budgets!
    Mrs. College Rental recently posted…2018 Goals for College Rentals 101My Profile

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    • Thanks for sharing Mrs. College Rental!!! That’s awesome that you were able to make some inexpensive gifts and include the kiddos. I hope that we can do the same as our kids get older 🙂

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    • Thanks for stopping by!!! My sister and I finally stopped giving gifts. I actually enjoy giving gifts to my parents although they aren’t always as enthused by what I want to give them 🙂

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  9. This year we did really well compare to the previous years. Wife and I just went to a couple of stores to buy Christmas gifts. For family and friends, we purchased gifts for them at TJ Maxx/Homegoods and for my two kids, we went to Zara to buy them clothes. We actually paid cash for all of them. Now for our own Christmas gifts (wife and I), back in August our 52″ Samsung TV finally gave up after 14 years. We decided to wait until Black Friday to purchased one so we can get the best deal. We ended up buying a 60″ Sony 4k Smart TV for $600 at Bestbuy.The best thing about the purchased was we agreed that the TV will be our Christmas gifts for both of us. We used our AMEX to pay for it and before Christmas, the bill was paid.

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  10. Hey Rob!

    This was a nice read especially after the holidays haha.

    We didn’t go into debt but have to admit that we spent over what we anticipated because we decided to buy my Dad an iPhone 10 for his Christmas/bday gift.

    The phone alone was a huge % of our holiday spending. But thought it would be nice for him since he plans to keep this phone for a very long time and it’s the phone he absolutely loves and wanted.

    Thanks for sharing this post! Great way to motivate your readers to plan ahead for 2018 Christmas
    fin$avvy panda @ finsavvypanda recently posted…Two Secrets to Crushing Your New Year Goals – Solid Advice From Warren BuffettMy Profile

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  11. Pretty much all of our gift giving was based on a budget established by friends and family. We went over here and there, but not by much because the budget itself was low. The gifts for us were not as important, but the activity of everyone getting together and having fun in the exchange 🙂
    SMM recently posted…Why I Finally Invested In BitcoinMy Profile

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  14. I didn’t go into debt at all over Christmas but it’s really scary and sad to see how much pressure a holiday can put on families.
    Christmas should be about spending a quiet day with your loved ones, presents or no. Hopefully others realise that sooner rather than later…

    Reply

  15. My wife got a minivan for Christmas. I got 60 months of payments! To be fair, her current car was 10 years old and we had “the talk” that since the kids will be entering college in just about 10 years, this vehicle may need to last her a few more years.

    I know many of you don’t believe in loans, but at 2.5% there is no way I’m going to take money out of this market to pay cash.

    I did break down and buy a $10 (6 foot!) tree and $10 in ornaments on clearance. Next year we’ll be putting a tree on the porch, but that will just make 4 in total.

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    • Thanks for sharing Mikes!!! I know different people have different appetites for debt 🙂 Sounds like you made a sound decision that you won’t be regretting. BTW…I’m impressed with the four Christmas trees 🙂

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  16. I spent less on my parents because they didn’t want much, and having watched them pare down this year, I’m not going to give them more ‘stuff’. I spent a bit more on one friend, but it’s a nice bottle of wine from a local place.
    My one friend always rolls his eyes and says I shouldn’t get him anything, but it’s usually things I see and think of him and just don’t give him until Christmas.
    My mom got me a set of knives and omg, having good knives again is amazing! I got a painting from my sister, which she painted. It’s exactly what I wanted!
    I have been pondering the futility of swapping gift cards. To be honest I’d rather have cash earning interest, or able to go to Vanguard. I suggested to mom ‘the 4 things’ as an idea for next year…want, need, read & fun (instead of wear). Because really if I got 4 small things from everyone that would still be a lot! We shall see if that works out. 🙂

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  18. Wow, I’m genuinely surprised how much credit card debt is accumulated at Christmas…especially for last minute gifts haha! Although…I shouldn’t be talking really. This year I actually opened up a new credit card to get the bonus points as I knew I would be spending money for travel, gifts, etc haha! I paid it off at the end of the month though 🙂

    Reply

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