No one wants to feel like a grinch during the holidays. But it’s that very guilt that drives us to spend more than we can afford.
Before whipping out the plastic this holiday season, here are some sobering statistics to help you slow your spending and throw less money at retailers and corporations.
Average 2018 Holiday Spending to Top $1,000 per Person
According to the National Retail Federation, the average American will spend $1,007.24 this holiday season. That includes gifts for others, cards, decorations, and other holiday-related spending.
Worryingly, that figure is up 4.1% from 2017 as well.
But can Americans afford to spend that much? The simple answer is no.
Over one in four Americans are still paying off credit card debt from last year’s holiday season, according to USA Today. And the trend is only worsening: 73% of Americans plan on using credit cards to finance gifts this year, up from 58% in 2017.
When asked how long they expect it will take them to pay off that credit card debt, the average response is 3.2 months, up from 2.3 months last year.
Gift Spending Has More than Doubled in Under 10 Years
How does this year’s holiday spending compare to years past?
Investopedia reports on a Gallup poll showing that the average American plans to spend around $885 on gifts alone this holiday season. Which is more than double the $417 that Americans planned to spend less than ten years ago, in 2009.
At this level of holiday spending, it makes one wonder if the holidays aren’t about commercialism, after all.
What Would Happen If You Cut Your Holiday Spending in Half
Imagine for a moment that you spent half of what the average American spends during the holidays, and budgeted $503.62 rather than $1,007.24. Still a high gift budget, but less exorbitant.
With the other $503.62 in savings, imagine that you invested it in the S&P 500 every year, for the next 30 years. According to Investopedia, the average S&P 500 return for the last 90 years is 9.8%.
Using our Choosing Wealth Calculator, you can determine that after 30 years of investing $503.62 at 9.8%, you would have $83,294.51 set aside to boost your nest egg.
That’s a huge chunk of your retirement savings – just from cutting your holiday spending in half.
And today’s baby boomers do, in fact, need the help. A study by GoBankingRates found that nearly a third (30%) of adults over 55 have nothing saved for retirement. Zero. Zilch.
Another 26% have less than $50,000 saved. That will leave over half of American retirees hopelessly dependent on shrinking Social Security benefits.
Ideas for Spending Less This Holiday Season
Ready to spend less this holiday season?
Here are a few ideas to help you spend less and save more. Your loved ones won’t love you any less for it – in fact, your kids will thank you when you’re financially solvent in retirement, and not asking to move in with them.
Set a Spending Limit
What are you willing to spend over the holidays?
Most holiday shoppers are haphazard, swiping plastic left and right, not bothering to adhere to a budget. Instead, set a specific holiday budget, in writing.
Then, break your budget down per person that you’re shopping for. Set a dollar amount for each recipient on your list.
Lastly, break that down further by listing exactly what you plan to buy for each recipient, and the cost. That leaves you with a simple, at-a-glance holiday budget, to see exactly where every penny of your holiday budget is going.
Shop in Cash
Credit cards leave you vulnerable to ongoing debt – just look at the one in four sad saps still paying off their credit card debt from last year’s holidays!
Now that you know exactly what you’re spending, and where every penny is going, take out that much money in cash and only use that cash for your holiday purchases. When the temptation arises to buy that one extra stocking stuffer, too bad: your holiday spending cash is gone.
If you plan to do your holiday shopping online, consider using a debit card, not a credit card. Sit down and do all of your online holiday shopping in one sitting, so you can be sure no extra items wander onto your shopping list over time.
Forgo Gifts Altogether and Go on a Family Trip
Last year, my wife and I decided we weren’t going to do holiday gifts at all. Instead, we went on a two-week tour of Germany and the Netherlands.
If that sounds more expensive than traditional holiday shopping, keep in mind that the trip’s costs came out of our travel budget, not our holiday budget. Rather, our holiday budget only slightly subsidized the trip, leaving our holiday spending far less than it would have been otherwise.
“Things” are fleeting. You’ll be bored with that new gadget within a month or two. But memories of traveling together as a family will last forever.
Create a meaningful experience with your family, actually doing something together, rather than filling up your house with more “things.”
Of the 26% of 60-year-olds who are on-track with their retirement savings, you can be sure that they prioritized their financial health, not the number of packages under the tree.
Now is a good time to ask yourself: What are the holidays about? Are they about buying ephemeral toys and trinkets? Trying to prove to your family how much you love them through how much you spend on them?
Or are the holidays about having meaningful experiences with your family, and spending time with them, rather than money?
Spending less and saving more is the recipe for building wealth. Time and money are your two most limited resources, but they should be invested differently. Invest your money in retirement planning, to help you live a long, prosperous life without burdening your family.
Invest your time with your family this holiday season. They’ll appreciate it more than another few bows and ribbons and packages.
What tricks have you used to spend less during the holidays? What might you do differently this year?