Staying Within A Holiday Budget

  • December 21, 2016
  • By: Greenpath Financial Wellness

For many Americans the holiday season is an opportunity to focus on the things that matter most in life.  Exchanging gifts is a long-standing tradition and is a way many share joy with loved ones. This tradition may also bring upon financial strain. GreenPath has some advice for staying within a holiday budget.

At this time of year GreenPath often sees study after study that demonstrate the negative impact of holiday spending on household credit. This year, we are encouraged by a trend showing that American households plan to take out less credit than in prior years.

A recent holiday spending survey found:

  • 77% of American adults planned to buy holiday gifts last year, and, on average, expected to spend $728. Of those purchasing presents, 78 percent didn’t expect to borrow to fund the purchases. Half of those who were taking on debt expected to pay it back within three months.
  • Low-income individuals were the least likely to borrow to buy gifts, foregoing purchases they couldn’t afford.
  • Families with children were more likely to take on debt and less likely to forgo gift-spending across the board.1

While an average of $728 to spend on holiday gifts feels high, overall, these numbers are really encouraging.  The study found that only 22 percent would find it necessary to borrow to pay for holiday gifts, and half of that 22 percent would pay it back, in full, in three months!

Furthermore, the other 78 percent that aren’t accumulating holiday debt reflect an increase in the financially-savvy of spenders in the United States.  Ideally, credit is used for convenience and should be paid back in full each month. But, using it for the short term and paying it back quickly before too much interest builds up, is the next best alternative. Paying the debt back in three months means that people are not simply sending in their minimum payments, but rather looking at their balance and sending in significant payments to tackle the debt aggressively in a short amount of time.

The study also found that lower income individuals were making financially resilient choices, when it came to staying within a budget. Saving for an emergency is a wise priority, instead of extending a large amount of credit for holiday gifts when on a fixed budget.

GreenPath is proud to serve thousands of clients every year that are committed to achieving their personal and financial goals.  We often hear compelling stories from our clients that have successfully navigated holiday spending expectations, with the most common solution being communication.

Honest and straightforward communication on personal finance is key in helping to relieve the stress and pays dividends in our most precious relationships in the long-run.

Finally, an important thing to remember during the holiday season is that spending time with people you love is a true gift. Think creatively of how to give memories to each other, which cost nothing.

Happy holidays from all of us at GreenPath Financial Wellness.