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Key Takeaways
- Many Americans overspend during the holiday season and then struggle to pay off their debt.
- Younger adults are generally more likely to fund purchases with debt and not stick to budgets, a survey found.
- Experts say the best way to avoid this stressful situation is to plan ahead, budget carefully, look for offers, and spend within your means.
What’s Driving Holiday Money Stress This Season
Ideally, the holidays would be a time of peace and happiness. For many American adults, though, they result in overspending, difficult-to-manage debt, regret, and financial anxiety.
A whopping 79% of the 2,084 adults surveyed by The Harris Poll on behalf of the American Institute of Certified Public Accountants (AICPA) said they’ll use credit cards to pay for gifts and travel this holiday season. Remarkably, about half of them (52%) don’t expect to pay off the balance in full when the bill arrives, and 17% said it will likely take more than six months for them to clear the debt.
A quarter of holiday shoppers said they usually create a budget for this period but struggle to stick to it, and 39% of respondents said they’ve later regretted their overspending during the holidays.
The solution sounds simple: just spend less. As many Americans will tell you, though, that’s easier said than done.
Why This Matters
Trying to make the holidays special by spending money you don’t have usually has the opposite effect. You don’t want to look back at your credit card statements in the new year with regret—that’s not what the holidays are about.
Younger Adults Are More Likely To Overspend and Expect Post-Holiday Debt
This stress-inducing financial habit isn’t uniform across all age groups. According to the survey data, younger adults are more likely to engage in debt-fueled spending during the holiday season.
Fast Fact
One-third of adults between the ages of 18 and 34 admitted they probably won’t stick to their holiday spending plan. Among older adults between the ages of 55 and 64, it was 16%.
Why do younger adults tend to struggle more with managing their finances? It’s partly the result of limited life experience, which can translate to fewer opportunities to learn financial skills. Another factor could be that younger adults generally dedicate more time to social media, which can trigger emotional or fear-of-missing-out-driven spending.
Ways To Avoid a Holiday Spending Hangover
To avoid turning a joyous season into a source of stress, make a plan.
“When spending is driven by emotions rather than a plan, it can get out of hand,” said Dan Snyder, the director of AICPA Personal Financial Planning. “Left unchecked, impulse spending, whether it’s on gifts, travel, or entertaining, can lead to serious financial drain. Having a plan can help spenders start the new year with their financial wellness intact.”
What does this plan entail? According to the AICPA, a good starting point is using the following guidelines.
- Set a budget and stick to it: The AICPA recommends taking the time to decide who you want to buy gifts for and how much you’ll spend on each gift before you start shopping. It’s also important to track your spending as you go to make sure you stick to your budget.
- Explore ways to minimize travel costs: Book travel in advance and be flexible with dates to secure better deals. And try to use points earned on credit cards to save money on flights, hotels, or car rentals.
- Keep credit card debt to a minimum: Pay off credit card balances in full or, if that’s not possible, as quickly as you can. In the case of unpaid balances on multiple credit cards, the AICPA advises prioritizing paying down the card that charges the highest interest rate while still paying the minimum on your other cards.
