The holiday season is here - a time when many Americans tend to overspend to find that perfect gift to share with friends and family.
According to NerdWallet’s 2024 holiday spending report, nearly three in 10 borrowers are still paying off their debt from last year’s purchases.
This year, you don’t want to find yourself haunted this holiday by the ghosts of Christmas past.
According to a Debt.com survey, 66% of consumers plan to take on debt for holiday shopping this year – a move experts say is very risky.
Tara Alderete is the director of enterprise learning at Money Management International -- a nonprofit that offers debt management plans and financial education.
“If you do incur debt during the holiday season, you want to pay that off as quickly as possible,” said Alderete. “You can get a handle on that early, you are ahead of the game.”
Avoiding a holiday spending hangover starts with evaluating your spending habits – before it’s too late.
“I'm midway through preparing for the holidays and I've spent more than I planned already. And so, I'm going to prioritize. Maybe it's more important for me to travel than it is to give larger gifts,” explained Alderete.
Alderete said consumers can’t neglect the signs that they are spending too much. If it’s more than you can afford, that’s a red flag.
“If you are finding yourself moving money from other accounts that you didn't plan, ‘I'm just going to move a little bit from my savings account or my overdraft account,’ that can be a red flag. And then using credit for everything,” said Alderete. “When you identify them, you just go back to that plan, and you make the revision, and you go from there. But those are all things to keep an eye out for.”
Don’t be afraid to have conversations with your friends and family about your budget if money is tight.
“When you start to talk to your relatives and your loved ones and you begin the dialog to say, ‘hey, maybe we could pull back a little bit on gift giving this year at Christmas, maybe we set a limit, maybe we do an exchange.’ What's funny is that most of the people in your circle are going to say, ‘that's such a fantastic idea!’ They're probably thinking it, but didn't want to bring it up,” said Alderete.
If you’ve already racked up some holiday debt, experts recommend prioritizing high-interest debt first. Credit card rates are at record highs, so the longer that debt sits, the more you’ll pay in the long run.
Finally, don’t put off asking for help. Many nonprofit organizations like MMI offer free or low-cost help to get you back on track.
“You can call and start on a debt management plan today and be on your way when the holidays arrive. And it doesn't mean that it's going to affect the rest of your budget. It might have a positive impact on the rest of your budget. And so, it's never too early to start,” said Alderete.
