During the 2005 holiday season, surging energy prices didn't keep Americans from showing retailers the money. According to the National Retail Federation, Washington, D.C., retail industry sales (which exclude auto manufacturers, gas stations, and restaurants) increased during November and December by 6.4% when compared with 2004. After all receipts were tallied, consumers spent a total of $438.6 billon that (2005) holiday season--more than $740 per person.
Maybe $740 isn't a lot of money to some, but for many it could mean groceries, gas, or even a mortgage payment. Regardless of how this money could be spent, the commercialization of Christmas and Hanukkah leaves many people feeling obligated to shell out more cash on piles of presents.
"People tend to increase their spending around the holidays for a combination of reasons," says Stanley Kershman, author of "Put Your Debt on a Diet: A Step-by-Step Guide to Financial Fitness." "Some may feel guilty about not spending as much time with their loved ones or friends and will compensate with a special gift. Others may feel they need to 'keep up with the Joneses' to match what friends, families, neighbors, and even co-workers are doing. And some simply get swept away in the glitter of the season--overspending before they realize what they're doing. For all of these reasons, setting a budget and making a list--and matching the two--can be really effective at reining in the 'over' part of holiday overspending."
While gifts most likely always will be synonymous with the holidays, they don't have to play the lead role. Alaska resident Christina felt Christmas was losing its joy and spiritual significance and her four children were well on their way to being spoiled. Feeling defeated during the holidays, Christina and her husband implemented the "Wise Men Rule." Christina was a respondent to the Home & Family Finance ® Resource Center's "What's Your Story" feature. (We developed this article with input from readers contributing to What's Your Story.)
"We explained that Christmas is a celebration of the birth of Christ and not about gifts. We told them how Christ received three gifts on his birthday from the Wise Men. And while we would not be giving the children gold, frankincense, and myrrh, we would honor the three-gift tradition as well," explains Christina. Last Christmas, Christina's children received one gift from Santa, one from their parents, and a sibling gift, where the four siblings drew names before exchanging. The children took to the idea wonderfully, but even better was that Christina and her husband experienced record-low holiday spending.
Changing the gift-giving dynamic within your own family is one route to holiday savings, but what about the other people on your list? The August Partners for Macerich Company, Santa Monica, Calif., reported in the "Shopping in America™ Holiday 2005 Survey #2" that the average American has 10 [9.8] people for whom to buy gifts. Since it's probably not realistic to think you can get out of buying holiday gifts entirely this year, you can limit how much you spend. Brad Stroh, founder and co-CEO of Freedom Financial Network, LLC, San Mateo, Calif., and bills.com recommends:
Most important, don't spend beyond your means. "If you run up a big bill to celebrate the holidays and then pay it off at a leisurely pace, 2007 is likely to cause financial heartburn—the sour sensation that your holiday overindulgence is taking way too long to leave your budgetary system," Stroh warns.
Consider the example of a $2,000 credit card balance at 18% interest. If your minimum payment is 2% of the balance due each month, it will take you about 19 years to pay it off and you'll pay $3,862 in interest.
"And don't forget the very foundation of the holidays--it's a time of charity, goodwill, peace, and joy. Nothing that you do with love and care should leave you feeling inadequate in any way," says Kershman.
Home & Family Finance® Resource Center
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