‘Tis the Season for Money Smart Holiday Spending
Carol Ehlers, Human Sciences Specialist in Family Wellbeing and Family Finance
This year, holiday shoppers are planning on spending more money, shopping earlier and trying new retailers.
According to TransUnion’s 2021 Consumer Holiday Shopping Report more than 1 in 3 holiday shoppers (36 percent) plan on spending more this year. Last year’s average American ran up holiday spending debt to $1,381 with almost 8 in 10 unable to pay it off by the end of January. So, for every $5 spent trying to pay off credit card debt, consumers give away $1 to the credit card companies.
According to Carol Ehlers, a human sciences specialist focused on family finance with Iowa State University Extension and Outreach, “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.”
Ehlers says ‘Money Smart Holiday Spending’ gives consumers confidence to manage their money and resources throughout the season and into the new year.
Money Smart Holiday Spending:
Create a holiday budget. Figure out how much you can afford to spend this holiday season. Financial planners recommend spending less than 1.5 percent of your annual income on holiday expenses. For example, for $35,000 gross income, that amounts to a $525 limit for holiday spending. If you have not saved that much, look for ways to cut back.
Make a list and check it twice. Create a detailed gift list with a set amount to spend, keeping track of what is spent. Research indicates consumers reduce their food expense by 25-30 percent by using a shopping list and this applies to other holiday spending categories.
Use cash, not credit. One way to do this is the envelope method. Make one envelope for each person and only put in what you plan to spend. If credit is necessary, charge only the amount that you can safely repay in a few months. Limit your charges to one card with the lowest interest rate and fees. Keep all receipts.
For more tips and information, subscribe to ISU Extension and Outreach MoneyTip$ Blog at https://blogs.extension.iastate.edu/moneytips/.