For many of us, the holidays are an exciting time filled with family, friends and a flurry of gift giving and receiving. Unfortunately, this time of year can also put a strain on finances and your financial health. In fact, we see many people start a new holiday season while they’re still working to pay off debt from the year before.
Each year, our holiday spending survey takes a look at how people are feeling about holiday spending, how much they plan to spend and their financial goals for the new year. We found shoppers plan to spend 75% more this year on holiday spending than in 2018 with an average of $1,649, and 63% agree holiday expenses affect their finances negatively. We also found 38% of the people we spoke to are feeling stressed as the holiday season approaches.
Getting a spending game plan in order now can help protect your financial health and keep your holidays merry and bright. Here are three ways to stay financially fit this holiday season and beyond:
- Create your holiday spending plan. Setting a budget is an important first step to ensure you’re not spending more than you can afford, but your holiday spending plan should include more than that. Think about who you need to shop for, where you’re going to shop and when you’re going to shop. Our survey showed the lure of a good deal can be hard for some to resist. In fact, one in five Americans said they would risk becoming a victim of identity theft for a good deal. Having a plan in place can help you avoid risky spending behavior while scrambling for last minute gifts. So, make that list and check it twice.
- Use credit as a financial tool. All year and especially around the holidays, I like to remind people that credit can be a financial tool, while debt is a financial problem. We know that about 44% of people plan to use credit to pay for gifts, and it’s important to do so responsibly. After all, the bills always arrive in January. If you’re going to use credit to pay for gifts, make sure you have a plan for paying your balances off to avoid missing payments and increasing your utilization rate – two critical factors that can have a negative impact on credit scores. Additionally, we found one in four shoppers plan to open a new credit card this season. Opening one or two cards to take advantage of in-store discounts or cash back offers can be a useful way to save money during the holidays, but don’t overdo it. If you take advantage of too many rewards offers, you may find you’ve saved yourself right into debt.
- Prepare your credit for holiday shopping and the new year. Getting your credit ready for the holiday season and the new year should be part of your holiday spending plan. That way, if you do plan to apply for new credit this shopping season or in 2020, your credit is ready to work for you. Get a copy of your credit report to ensure there are no surprises and catch up an any missed or late payments. This is also the first holiday season you can use free tools like Experian Boost to improve your credit scores if you’re paying your telecom and utility payments on time. We see scores improve for two out of three users with an average boost of more than 10 points. If you have a limited credit history or a thin credit file, you may see an even bigger boost to your credit score. We know almost have of those we spoke to for our survey will try to improve their credit score before the start of the new decade and Experian Boost is proving to be a valuable tool for consumers looking to do just that.
There’s often the temptation to overspend, but the best gift you can give yourself is being financially smart. My hope is these tips can help boost your holiday cheer while preparing you for a financially healthy new year.