CHRISTMAS GIVINGIt’s the most wonderful time of the year! The fragrance of Christmas is all around us, and so are the shoppers. It’s amazing to see millions of consumers daily “dashing through the snow, and other wintry weather conditions, to shop themselves into debt, in the name of Christmas. Nothing wrong with Christmas shopping. It is a beautiful time of year for giving. But no one talks about how to avoid the aftermath of looming, growing debt as a result of holiday shopping.
As I thought about this topic, I asked myself the question: What are the statistics on holiday debt? In the article, “Holiday Debt Could Take Years to Pay Off, Study Concludes”, author Jessica Dickler provided some interesting statistics:
- Towards the end of 2018, Americans had more than $1,000 in holiday debt
- Nearly 42 percent of these consumers said they would pay it off in 3 months or less
- The other 57 percent said it would possibly take them longer than 5 months to pay off their purchases
- Consumers making minimum payments could possibly pay off their holiday debt in 5 years
As a financial literacy educator/advisor, these thoughts came to mind as I read the statistics:
- Americans are okay with debt, but will not prepare to avoid it
- Some can pay off their debts, some will pay it, others just won’t…
- Somehow we have been tricked into the beauty of making the minimum payment because we do not understand compounding interest, which is what credit card companies accrue significantly for their best interests (pun intended)
Here are some simple strategies to apply to avoid the holiday debt trap:
- Establish a separate account for holiday spending. Throughout the year, contribute a dollar amount towards it
- Set limitations on how much you will spend. The ultimate goal is to stay within those boundaries. This is a great way to exercise discipline, the one thing most Americans lack when it comes to spending
- Develop an eco-shopping mindset. My husband and I have become huge fans of gift certificates. These are WONDERFUL! You can find a gift certificate for everything ranging from restaurants to spa resorts. You also save gas! Why drive when you can shop for these and other gifts online?
- Establish wealth accumulation accounts as gifts. It is customary to give traditional gifts: toys, jewelry, cars, etc. But why not give an investment that builds wealth? Tax advantage solutions, ROTH IRAs, are some examples of investment/financial protection gifts that can be surprisingly cheap, with minimal to no depreciation in value
Bottom line is, if you are tired of accumulating holiday debt, or know someone who accumulates debt every year, these tips can help you avoid the holiday debt trap. Not only that, you will develop a mindset of an active saver and become more of a passive spender. The greatest gift is shopping without fear of surmounting debt.
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