Holiday Debt From Credit Card Hangover: It pays to use caution

Here are some startling facts about Holiday debt spending and credit card use. The average U.S. household spends $490 on Holiday gifts alone. Most household budgets cannot bear an extra expense that high in a single month so a great deal of this holiday debt spending goes on credit cards. Once the Holidays are over, the credit card bills start to arrive. The stress that was lifted by the credit card is now merely delayed and financial worries can result. Research conducted at Ohio State University in 2000 discovered that people who worry about credit card bills are more likely to suffer heart problems, sleeplessness, an inability to control emotions and a loss of concentration. As these problems continue to build, they contribute to the crisis that we now observe as one out of every 100 households in the United States files for bankruptcy each year.

  • Did you know that the average American household has 13 credit or debit cards?
  • Did you know that Americans spend 112% more when using a credit card as compared to cash?
  • Did you know that the typical “minimum monthly payment” on a credit card is 90% interest and only 10% goes to reduce the debt?
  • Did you know that the average American household has $5,800 in credit card debt and if you just make the minimum payment on that debt each month it can take as long as 30 years to pay it off?

The real message here is to use common sense, avoid using credit cards to prevent holiday debt, and make a Holiday spending plan you can keep. One major key is to do your Holiday shopping early to avoid holiday debt. When you put Holiday shopping off until the last minute, panic rises and you are much more likely to overspend, buy overpriced items and become unable to control the use of your credit card.

Beyond the Gifts: Holiday expenses that avoid detection

It is easy to understand that Holiday gifts are a major expense but here are some other budget breakers you may not have thought about to prevent Holiday debt:

  • The additional decorations you bought to keep up with the neighbors
  • The additional power to light all the extra lights
  • The extra goodies, sweets, candies, and drinks made available for weeks to keep the Holiday spirit festive
  • The new outfits to attend Holiday parties
  • The overnight postage because you bought gifts too late
  • The tickets to Holiday concerts and plays
  • The food bought for the big Holiday feasts

The Holidays would not be the same if we didn’t celebrate and many of these expenses tend to be for important parts of our festivities. Often, we don’t count such items into our planned expenses and then wonder why our budget is in bigger trouble than we anticipated. That is why looking at the broader picture and planning ahead is essential, thus preventing Holiday debt.

Feeling Holiday Gift Pressure? Here’s how to handle it and still enjoy the Holidays

By far the biggest regret after the Holidays is overspending. Most people spend far more each year than they can fit into their household budget and they suffer for it in the months ahead. The easiest way to control spending is to plan ahead. Planning consists of making a list of every person you want to give gifts to and indicate the maximum you will spend on their gifts. If the total is too high, reconsider what you will spend on their gifts until the total feels comfortable. You may have too many individuals on your list and you may need to consider inexpensive gift alternatives for people like co-workers, neighbors and service people. If your family is large, you may want to suggest drawing names or agreeing on price ranges to make your Holiday gift plan work. These steps will help you avoid Holiday debt.

Children are seldom sensitive to the cost of their gift wishes and often exert a lot of pressure on parents for gifts that are more expensive than they can afford. One solution is to anticipate their excitement and manage their expectations by setting limits in advance of the Holidays. Help the children make a wish list and show them how to prioritize the list according to the things they want most. Help them understand that they will receive some items on the list but not all so they do not have unmet expectations and disappointments later. Children may not realize it but they need a parent who is not stressed out by bills in January more than they need another toy.

Many times certain people on your gift list fall into the category of having everything they need. Neither the gift-giver nor the gift receiver enjoys trying to act excited about a token gift. Instead, consider giving a gift that expresses meaning instead of material. You might find something sentimental in the family keepsakes that they might treasure. You might even give them a gift of time such as yard work, or pet sitting, or even a local day outing to something they would enjoy.

Another way to add meaning and a sense of warmth to the season without cost is to help others less fortunate. You can invite a lonely friend to your Holiday dinners, or volunteer at a charity to distribute gifts to needy children, or go help serve at a soup kitchen, or homeless shelter. All of these forms of giving don’t need to cost much but they will add a great deal to your Holiday memories that will last a lot longer than the opening of expensive gifts that cost more money than you have.

It is always good to keep the primary idea of the Holidays in focus. Often people become so agitated by the demands of the Holidays, they forget that the central idea is to have a celebration of joy during this time of year. One thing that can ruin those good feelings is the dread of knowing you have to deal with a budget crisis in the New Year due to overspending. If you follow some of these simple guidelines you will probably not disappoint anyone and you will avoid the regrets of spending more than you can afford and the weight of Holiday debt.