Nearly half of Americans still carry debt from last year's holiday season

 

MILWAUKEE (CBS 58) -- The holiday season is upon us, and while the cheer and festivities bring joy, they also come with financial challenges. According to a recent survey by WalletHub, nearly half of Americans are still carrying debt from last year’s holiday shopping.

For many, the allure of holiday sales, gift-giving, and celebrations led to overspending in 2023. Credit card balances, store loans, and buy-now-pay-later plans have contributed to lingering financial burdens. WalletHub’s survey revealed that nearly 52% of people will apply for a new credit card to help with holiday shopping. The average holiday debt in 2023 was $1,249 per person. Carrying this debt into the next holiday season can create a financial snowball effect, leaving little room for savings or emergency funds.

Holiday sales often heighten the temptation to spend, as consumers are drawn to the promise of savings. Purush Papatla, professor of marketing at the University of Wisconsin-Milwaukee, explains the psychological appeal of discounts: "We also want the gratification of feeling smart, by saying to ourselves, hey I saved $25 today, which I couldn't have yesterday."

This sense of accomplishment, while rewarding in the moment, can lead to overspending on items that may not have been necessary in the first place. Experts encourage shoppers to focus on their needs and planned purchases rather than being swayed by flashy deals.

In addition to overspending, many Americans are rethinking the sheer volume of gifts exchanged during the holidays. Kelsey Campbell says with a baby on the way, she has simplified her approach to gift-giving and offers a refreshing perspective: “People buy what they need anyways, they don’t really need all the extra crap,” she said.

However, some families feel cultural or generational pressure to maintain traditional gift-giving practices. Consumer Michelle Carlson shares how her mother’s expectations often lead to additional financial strain. “Everybody has to have things to open, that’s really important to her,” Carlson says.

Others are embracing a different approach. Mary Tarman, for example, has encouraged her children to avoid spending money on her. “I tell the kids don’t buy me anything, I have everything I need,” she says.

Similarly, James Flath says he’d welcome the idea of a friend or relative who wanted to skip gifts altogether. “I’m all for it. I’d say, let’s get coffee, let’s get dinner instead, I care more about the relationship with someone.”

Ideas for curbing holiday spending in 2024

• Set a realistic budget
  • Start by determining how much you can afford to spend without relying on credit. Allocate funds for gifts, travel, and holiday meals, and stick to your plan.
• Take advantage of sales strategically
  • Sales can be great opportunities for savings, but only if purchases align with your planned budget. Avoid impulse buys and make a list beforehand.
• Use cash or debit cards
• Studies show people spend less when using cash or debit cards instead of credit. If you’re shopping online, consider using a prepaid card to limit spending.
• Start saving early
  • Even setting aside a small amount weekly leading up to the holidays can make a big difference. Some banks offer holiday savings accounts to help you prepare in advance.
• Communicate with loved ones
• If finances are tight, be honest with friends and family. Suggest budget-friendly alternatives like a Secret Santa exchange or setting price limits on gifts.