Are you looking to spread holiday joy by gifting your friends and family with items they will love? Gift-giving is an important part of the holiday season for many people, and it’s a great way to show appreciation and put smiles on people’s faces. However, buyers often get carried away with Black Friday, Cyber Monday and other holiday “bargains”. Before they know it, they are starting the new year with holiday debt to pay off. While extravagant items like designer clothes or electronics can make wonderful gifts, they are not worth risking your financial health.
1. Paying off holiday debt can be a lengthy process
A survey conducted by MoneyGeek found that many Americans are still working to pay off holiday debt from last year. In 2021, the average holiday spending per person was $1,131, and more than 25% of shoppers said they regret the amount of money they spent.
As of February 2022, 40% of Americans still owed holiday debt from the previous year, with individuals aged 35-54 carrying the most unpaid debt.
2. Men generally spend more than women
Statistics from the National Retail Federation show that last year, men spent an average of $1,046 during the holidays while women spent an average of $952. In addition, a survey from CreditCards.com discovered that 40% of men and 34% of women were willing to go into debt for holiday-related expenses. Nineteen percent of men said they were doing so to make purchases for themselves.
3. 41% of shoppers have a budget of $500 or less
Inflation has certainly taken its toll on shoppers’ budgets going into the holidays. As a result, many shoppers plan on taking precautions to avoid debt and overspending. A recent survey from U.S. News & World reported that 41% of the 1,114 respondents planned on spending $500 or less on holiday purchases this year. This is an increase from last year’s survey, in which under one-third of respondents said they planned to spend $500 or less.
4. Buy now, pay later services have become more popular
With how normalized and convenient online shopping has become over the years, it comes as no surprise that the use of buy now, pay later e-commerce services is on the rise. Apps like Afterpay, Affirm and Klarna allow you to split your total payment into a series of smaller payments to make the buying process more manageable. This is a smart way to avoid debt—as long as you keep up with your payments. Keep in mind that some apps might charge interest or fees for late payments.
According to a report from LendingClub, approximately 37% of American shoppers said they will depend on personal loans, credit cards and buy now, pay later services this holiday season. This is a slight increase from 34% in 2021.
5. Gift cards are in higher demand
If you are not sure what to get someone or need a last minute gift, a physical or digital gift card is always an option. According to a holiday shopping survey by Coresight Research, almost 6 in 10 shoppers said they would like to receive gift cards this year. In addition, a forecast from Blackhawk Network predicts that shoppers will spend 18% more on gift cards this year compared to last year. Besides giving the recipient the option to select their gift(s), gift cards can also benefit you in return. Certain credit cards offer cash back when you spend a certain amount at supermarkets and gas stations. If you are purchasing multiple gift cards, the money you put onto them can help you reach the required amount.
Generation X, individuals born from 1965 to 1980, typically spend the most money on holiday purchases. According to Cloudways, they spend an average of $782. This is higher compared to the $609 that Millennials spent and the $576 Baby Boomers spent.
Tips for avoiding holiday debt
Holiday debt is the last thing you want going into the new year. Here are some tips to avoid it:
Create a budget
Setting up a budget can provide an overview of how much you have and what you are willing to spend. Keep in mind that holiday debt does not always solely consist of gifts—it can also include food, decorations or even travel. Therefore, make sure you factor those expenses in along with the gifts. Once you have made your budget, make a plan to stick to it. Try your best to avoid impulse purchases and beware of common retailer tricks.
Create a gift list
Before you begin shopping, write down a list of gift recipients and cross off names as you go. While this may sound like a basic holiday shopping tip, many people tend to create a mental list of names and often forget a few. Even though setting a budget for each person can be a tedious process, it will help keep your overall budget on track.
Track your spending as you go
A budget can help you stay on track, but tracking expenses is ultimately up to you. Keeping track of your purchases can help you stay on budget and prevent overspending. Therefore, be sure to keep receipts and add up the numbers at the end of each shopping trip.
Know when to shop
The sooner you start your holiday shopping, the easier it will be to take your time and organize carefully. You might have people on your list with time-sensitive gifts like teachers, friends or co-workers. Therefore, it is a good idea to start shopping early and make sure their gifts are ready on time.
If you want a head start on some of next year’s holiday purchases, get your hands on a clearance schedule to see what discounts your favorite stores may be offering.
Get creative
If you need to cut down on expenses, you can always find ideas of online, low-cost gifts. If you enjoy arts and crafts, create some thoughtful DIY gifts. If you are a good baker, give your friends and family a taste of your skills like your famous creamy lemon pie or triple chocolate cookies. You can also consider gifting secondhand, gently used items if they look as good as new.
Find a side hustle
If there is a good chance you will overspend, consider finding a side job to cover the extra costs. Evaluate the skills you could offer and find a relevant position with duties you are comfortable performing. If you are a confident driver who is good with directions, for example, you could look into driving for a rideshare service like Uber or Lyft. If you are a skilled writer, consider finding freelance writing positions on sites like Upwork or Fiverr.
Be a smart shopper
You do not have to break the bank gifting your loved ones this holiday season. You can still spread holiday joy while staying on budget and avoiding debt going into the new year. Happy shopping!