Financial behavior expert, Stacey Tisdale, helps you master your mind’s ‘urge to splurge,’ and stay out of the holiday overspending trap this season, avoiding what can turn into years of damaging debt.
According to PwC.com, Americans planned to spend on average $1,194 during the holiday season on gifts, travel, and entertainment. While this figure is less than previous years, people were looking to spend 9% more on gifts than before as many families put plans for travel and gatherings on hold due to COVID-19. Also, many Americans said they would be more generous with those outside their immediate circle of family and friends in the wake of the pandemic. Pets too were at the top of the magnanimous gift giving list.
It’s fine to spend $1,194 on the ones your loved ones—family, friends and even your pet—if it’s within your budget. But for far too many of us, that’s not the case.
Magnifymoney.com found that consumers who went into debt during the holiday season racked up an average of $1,381. Pay just the monthly minimum credit card payment of $31 at an interest rate of 14.5%, and it will take more than five years to pay off that debt. Plus, you’ll pay more than $600 in interest.
Telling someone to stop overspending without figuring out why they’re doing it is like telling someone to stop overeating without finding out what’s behind the behavior. They may be able to change for a time, but sooner or later old habits creep back, and run the show.
The Real Causes of Holiday Overspending
Without going into too much psychobabble, there are 3 major factors that drive all of our spending, holiday spending being no exception.
- The first lessons we learn as children have a huge impression on our adult behavior. For many of us, our parents were working. They tried to compensate for not spending time with us by buying elaborate gifts that they probably couldn’t afford. That’s what you saw growing up, are you’re doing the same for the people you care about?
- Social messages also cost us dearly. Advertisers tell us what we ‘must have’ and ‘must give’ in order to be good people and good parents. The financial industry tells us it’s perfectly normal to pay for these things on credit. We blindly follow this message right into credit card debt.
- How we perceive ourselves: Taking an honest look at some of the limiting beliefs we have about ourselves is critical when it comes to avoiding the holiday spending trap. Am I the person who always picks up the check? Am I the person who has to send out 500 holiday cards? Am I the guy that gives my wife expensive jewelry? These perceptions play out in your financial choices. You can actually put a dollar value on them.
Aligning Your Spending With Your Values
In order to begin your ascent from the holiday spending trap, you must have a deep connection to your overall financial goals. This not only gives you a moment of pause before you spend, but neuroscientists have also learned that when we set a goal, we set off a chemical process (dopamine) in our brains that helps us achieve them – our thoughts and actions begin to organize for success.
Goals also provide us with the motivation to stick to financial plans. They do, however, need to be specific. “I want to get out of credit card debt in 6 months.” “I want to save $5,000 towards a down payment on a house this year.” “I want to put $1,000 in my child’s college fund.” Figure out what you want to achieve and figure out what it costs. That will help you find the motivation to avoid holiday overspending.
Before you spend, get into the habit of asking yourself:
- Can I afford this?
- Is this spending in line with my goals?
- If not, why am I doing it?
When we spend money that is not in line with our goal and priorities something else is going on. What are the messages you tell yourself to justify that spending? “If I don’t drive car x, I’m not going to fit in.” “It’s okay to go into credit card debt, I’ll pay it back when the economy picks up.” “I can’t save money.” These messages are rarely true and don’t have to be. It’s important to become aware of these sneaky little tricks our minds play on ourselves, so that we’re prepared when they surface and try to run the show.
Keeping Yourself on Track
It’s also important to set yourself up for success when it comes to keeping your holiday spending within your budget.
- Go shopping with a list and stick to it.
- Do not take money from your emergency savings. The holidays are not an emergency.
- Don’t spend more than you can pay back in one month
- If you have problems with credit cards, don’t take them shopping. Bring cash or a debit card.
If you do find yourself drowning in debt this holiday season, there are places you can go for help. Credit Sesame is a great resource for debt management, as is Money Coach University. The National Foundation for Credit Counseling also offers free credit counseling and ongoing support.
Most important, the holidays are about enjoying the love we receive and the love we have for those around us. Don’t hesitate to reach out to the people close to you for support during this time. Share your goals, your desire not to end the holidays in financial disarray and find ways to express your feelings for each other that don’t bust your budget.