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The holidays are a time to give thanks, reflect on the past year, and spend time with family and friends. However, if you’re not careful, it could also be time for you to overspend on holiday purchases.
About 83% of Americans plan to buy gifts for friends and family this holiday season NerdWallet Survey.
Americans expect to spend an average of $1,014 on Christmas or other holiday gifts in 2024 — “significantly more” than the $923 reported last year, according to a Gallup poll published on October 25.
About 10% of consumers expect to dip into their emergency fund to buy gifts, and 9% will prioritize gifts over household bills like utilities and debt, according to the NerdWallet survey, published Oct. 8.
According to a recent survey, almost half of shoppers will finance their expenses this year with loans or credit cards questionnaire by professional service provider EY. Meanwhile, 28% of people are still paying off credit card debt from the 2023 holiday season, NerdWallet found.
People have an innate urge to overspend, experts say. They are “wired” to be consumers, says Brad Klontz, a psychologist, certified financial planner and behavioral finance expert.
“For 99% of our time on Earth, thinking about the long-term future has not served us very well,” said Klontz, a member of CNBC’s Financial Advisory Council and the CNBC Global Financial Wellness Advisory Board. “Meeting our immediate needs was what it was all about.”
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The short-term satisfaction of giving gifts to loved ones can overshadow the long-term focus needed to manage money well, Klontz said. That’s where many people fall short, he said.
“We can overspend because our long-term goals are much more abstract, and it actually requires us to engage in additional levels of cognitive processing to delay immediate gratification,” he said.
Additionally, consumers may feel social pressure to spend more than they would like because they don’t want to appear “cheap,” says Andrea Woroch, a consumer finance expert.
Many companies also promote deals — for example on Black Friday and Cyber Monday — that can trigger a “buying frenzy,” she said.
This way you avoid spending too much money during the holidays
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There are several ways consumers can keep their holiday bills within a reasonable range, experts say.
Here are some of their tips.
- Develop a spending plan now around how much you want to spend on the holidays, Klontz said. It’s not too late, even during Black Friday weekend. Consumers can use a gift registry app, such as Santa’s Bag, to track purchases and actual spending, Woroch said.
- Think beyond gifts, Woroch said. There are many more potential seasonal expenses, including groceries to feed out-of-town guests or for holiday parties, holiday party clothes, family photos, greeting cards and postage, seasonal outings, dinners with friends, fundraising events at your children’s school, and donation drives . You may need to cut back on certain costs or spend less on gifts to accommodate this, she said.
- Set gift expectations now with family and friends, Woroch said. This could mean focusing just on children or setting up a ‘Secret Santa’ exchange so you are only responsible for one gift instead of many,” she said. Instead of a physical gift, perhaps find an activity to do together. Or set a gift budget, suggesting a lower amount this year, Woroch said.
- Take advantage of free rewards to offset the gift costs, Woroch said. For example, she recommends signing up for free retail loyalty programs to earn cash back that you can use for other gift purchases; shopping through cashback portals such as CouponCabin.com or Rakuten for online purchases; and downloading a browser extension like Fetch to earn rewards or free gift cards.
- Take time to think about your long-term goals that “are really important to you,” Klontz said. This can help curb the impulse to make short-term purchases.