The winter holidays are here. Need a reminder? Check your bank statements.
The National Retail Federation calculates that the average American will spend about $998 on Christmas gifts, decorations, meals and a few items for themselves. The total falls about $50 short of the pre-pandemic high set in 2019.
Cardify, a market research platform that tracks consumer transaction data from its mobile-rewards parent company, Drop, surveyed 2,000 Buy Now, Pay Later (BNPL) platform users. It found that 54% of them will charge a credit card for gifts this holiday season.
That falls between debit cards at 65% and BNPL plans at 45% popularized through platforms like PayPal and major retailers like Amazon and Home Depot. Cash? According to Cardify, 31% will use the old-timey currency to make a purchase. Of course, there is crossover within the data as survey respondents chose more than one option.
Christmas arrives in less than two weeks. Even so, Justin Buttrick, president and founder of Vision Wealth Advisors in Lewisburg, said it’s not too late to make a spending plan. It might be hard but it’s a great way to avoid overextending one’s personal finances and a great way to alleviate anxiety, Buttrick said.
“They might not like to hear the word budget around the holidays. It might make them feel more like Ebenezer Scrooge than Santa Claus, but making a budget doesn’t mean you can’t be generous,” Buttrick said.
BNPL can help, but shoppers must abide by the terms. Make the installment payments on time and enjoy an interest-free purchase. Failing to meet the terms risks penalties and added dollars.
“Assuming you’re responsible and aren’t a debt burden, I don’t see a problem using it,” Buttrick said. “For those who don’t have an issue with racking up debt it can be a useful tool.”
So, make a list. Seriously. Check it twice, if you like. Decide who’s getting gifts, Buttrick said, set a limit and stick to it. It doesn’t have to be to the penny, he said, but at least create a range to abide by.
Ah, debt. The average American credit card holder racks up enough of it. An analysis by Motley Fool found the average credit card debt totals $5,525. Now, that’s down by $968 from before the pandemic. Total U.S. credit card debt dropped, too, to $787 billion, according to the analysis.
But, this comes as a widely circulated Bankrate survey last year found that nearly 60% of U.S. adults couldn’t make a $1,000 purchase from savings if faced with an emergency.
Stacy Mastrolia, an associate professor of accounting at Bucknell University, teaches personal finance to university seniors.
Mastrolia looked beyond Christmas 2021. She advises people plan now for next year. Put aside $100 a month, or whatever amount is comfortable. Do so by cutting out an unnecessary purchase each week. A pizza night here and there, she said. That’ll create $1,200 by the time Christmas wishes are made in the year to come.
In the immediate term, Mastrolia agreed with Buttrick in making a list, setting a limit and sticking to it.
She suggests making a game of finding deals.
Gift ideas? How about a framed personal photo, perhaps, or journals and books?
Gifting one’s skill might cost nothing and mean so much more to the person on the other end.
“I regularly gift people free tax service. For me it’s not a big deal but for others that’s a few hundred dollars,” Mastrolia said, emphasizing creative planning for gifting skill and time.
Families with kids who’ve grown could consider shifting to the Secret Santa method: set a spending limit, give and receive a gift anonymously.
Another cost-saving consideration: cut spending in other areas this month.
“Don’t make December the month you get your hair colored or go out to dinner with family,” Mastrolia said.
And, she said, remember that gifts won’t mend fractured relationships. Don’t spend to make amends.
