The festive season, ideally a period of joy and peace, frequently transforms into a source of financial strain, anxiety, and remorse for many individuals. This recurring cycle of holiday overspending can lead to accumulating debt and persistent regret.
Understanding the Dynamics of Holiday Expenditure
A recent survey conducted by The Harris Poll on behalf of the American Institute of Certified Public Accountants (AICPA) revealed significant insights into adults' holiday spending habits. The findings highlight that holiday expenditures frequently escalate beyond control, largely due to easily accessible credit, societal pressures, aggressive marketing tactics, and impulse purchases.
Carolyn McClanahan, founder and president of Life Planning Partners, Inc., pointed out that the desire to express love often drives individuals to purchase gifts exceeding their financial limits. She suggested a subconscious belief that more expensive gifts equate to a deeper demonstration of affection. This sentiment is amplified by pervasive advertising. McClanahan noted, "The relentless media pressure, from social media influencers promoting unattainable lifestyles to commercials inundating every screen and mailbox, makes it nearly impossible to escape. This marketing frenzy fosters a perception that everyone else leads a more opulent life, compelling individuals to engage in excessive spending to keep pace."
The AICPA's survey uncovered several critical patterns. A significant revelation was the tendency for many to fund their holiday shopping through borrowing, only to experience regret and then repeat the behavior in subsequent years. Approximately 39% of respondents admitted regretting past overspending during the holidays, yet 79% still plan to use credit cards this year. Even more concerning, half (52%) do not anticipate clearing their balances when the statements arrive, meaning that gifts purchased on credit will ultimately cost considerably more due to interest.
The straightforward solution would involve saving for holiday expenses and adhering to a budget. However, few people heed this advice. The survey indicated that only one in four Americans creates a holiday budget, and even those who do acknowledge they are unlikely to stick to it.
Strategies for Prudent Holiday Spending
The AICPA advises that the most effective way to prevent overspending is to pre-determine recipients and allocate an affordable budget for each person before beginning to shop. It also recommends creating a gift list in advance and carefully considering any purchases not on that list to curb impulse buys. Regularly tracking expenditures can further aid in staying within financial limits. Early travel bookings and utilizing price-tracking applications can also alleviate pressure, preventing hasty, costly decisions.
For certified financial planner McClanahan, eliminating the allure of retail ploys and marketing psychology is paramount. This becomes far more achievable by avoiding last-minute shopping and having a well-defined plan. She suggested, "Consider purchasing thoughtful gifts throughout the year to bypass the intense marketing hype of the holiday season. Create a definitive shopping list and commit to it. Sales displays and advertisements can trigger impulse buys, and a list serves as a safeguard against succumbing to these temptations."
Regarding couples, McClanahan emphasized the importance of collaboratively establishing a holiday spending budget. She also highlighted the value of considering gifts that do not involve monetary cost. She advised, "Couples should develop gifting policies that align their views on gift expenses and their preferred ways of giving and receiving. This approach helps eliminate the pressure to outshine each other in demonstrating affection. Furthermore, explore non-monetary gift ideas. For instance, my photographer husband occasionally needs a model; though I dislike posing, I lovingly offer him gift certificates to be his stand-in."