The most wonderful time of the year. Is it? Is it really? It certainly can be if we handle it wisely. Remember those three guys who showed up bearing gifts? Well, nowhere does it say they put it on a payment installment plan, or worse, on a credit card with 18 % interest. They gave from the heart and from what they had, not what they borrowed.
We enter into this season wide-eyed with visions of love and laughter. We think of all the amazing things we will give and be given. Christmas and Hanukkah are both wonderful celebrations with traditions that encompass gift giving. Because gift giving is good, it’s a sign of love, friendship, and appreciation, but at what cost?
Debt is already a huge problem in America and holiday debt is a growing factor. LendingTree – a company that provides loans, credit cards and more – follows debt incurring trends. They reported this year that 35% of Americans took on holiday debt in 2022 — about the same percentage as the prior year (36%). But the average debt jumped to $1,549, up 24% from last year’s $1,249. This is the highest the company has seen since it began tracking average debt levels in 2015. So, not only is the trend of taking on debt to buy gifts for others continuing, the monetary amount of that debt is increasing. Remember, that is just holiday debt – in addition to “normal” debt we accrue all year long.
CNBC recently reported that 25% of Americans still have holiday debt from last year based on WalletHub’s 2023 November shopping survey.
Can you imagine trying to buy a gift for your sister and you haven’t finished paying off last year’s gift? Does she even use the rice cooker?
Dave Ramsey – financial guru of Ramsey Solutions, Inc. – who has created a multi-million-dollar company helping people get out of debt uses the following example to illustrate the potential problem. Let’s say you put $998 of Christmas spending on a credit card with an interest rate of 17% – a very realistic scenario. You decide to pay only the minimum payment of $25 each month because it just seems easier that way, and because life happens and you still need your income to live off of in January.
According to Dave – It would take you five years to pay off your balance! By the time it’s all said and done, your $998 of debt would cost you $1,481.55 – thanks to interest. That’s an extra $483 tacked on to your holiday bill for just one year of Christmas spending.
But not you – as you insert, swipe, and tap your way through shopping – so excited with each amazing purchase to make so-and-so so happy – you know you will pay the balance, in full, first thing the day after Christmas. Ahhh, the best of intentions, and then life happens.
Knowing that so many people fall into this trap each and every year, simply take a moment before the shopping begins. Make the list, check it twice, who do I really need and want to buy gifts for the year? Include the family you love so dearly and then all the “other” gifts that will most assuredly come up. One for the boss, the babysitter, the teacher, the mail carrier. Draw a hard line in the sand on who will get gifts and who will simply get a sincere thank you note or Christmas card. Then decide on a budget – a budget based on real-life numbers – not $1000 because it sounds like that would nicely cover the twelve gifts you want to get. Take the $600 that you can afford to take from your bank, give lovingly, and not miss a beat on your next set of monthly bills. Then take that number and break it down further, a budget within a budget per person. Remember to consider tax and possibly shipping if needed, and then stick to it.
If the budget is a little tighter this year – and there is no shame in that – make the hard decisions. Sit out on the friend’s “Secret Santa”, buy a family gift as opposed to individual items. Shop the thrift stores or Facebook Marketplace. You would be amazed at what you can find there: brand new items still in the original wrapping are not uncommon, as well as candles, games, great books, and even clothes with original tags. Also, be honest with friends and family, up front, early on; say that you can’t do the gifts this year. Many are thinking it, few will say it. Feel the burden lift. Create new traditions in place of gift exchanges, such as a game night at the holiday party.
No gift to someone you love should become a burden that you carry long term. No person you love, and who loves you, would want that gift.
