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

January 8, 2018

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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.