The True Cost of Holiday Spending

The True Cost of Holiday Spending

The holiday season is a magical time, but along with the festivities comes a lot of pressure to buy gifts, host parties, and splurge on holiday traditions. For many, this means pulling out the credit card and racking up debt, or even applying for a holiday loan all in the name of showing love to family and friends.

While we’re here to provide for all of your financial needs at CSE, we also believe that showing love shouldn’t come at the expense of your financial health.

Here’s how you can spend this holiday season in a more meaningful way without breaking the bank.

The Holiday Debt Trap

It’s easy to fall into the debt trap during the holiday season. For some, it’s not having a list and sporadically buying; for others, it’s simply the cost of items these days. But here’s the truth: the joy that comes from those gifts is often fleeting, while the financial burden of holiday debt can linger for months, or even years.

Consider this: the average American racks up around $1,300 in holiday debt each year, according to reports. And many of these purchases are made on high-interest credit cards. If you can’t pay off your balance right away, that $50 gift could end up costing much more once interest piles up. You might still be paying for this holiday season well into the next, leading to a vicious cycle of financial stress.

Here are some ways to pay-less during the holiday season:

1. Plan Ahead for Future Holidays. One of the best ways to avoid an overabundance of holiday debt is to plan ahead. Start setting aside small amounts each month into a holiday savings account. By spreading the cost of the holidays over the entire year, you won’t be hit with a large bill all at once. Many credit unions, including us here at CSE, offer specialized holiday savings accounts designed to help you save without feeling the pressure.
2. Consider a Lower-Rate Credit Card. Choosing a low-rate credit card over a high-rate one for holiday shopping can save you money in the long run. Typically ‘store cards’ run with a high-interest rate. With a lower interest rate, any balances you carry after the holidays will accumulate less interest, making it easier to pay off your purchases without facing overwhelming finance charges. This allows you to focus on enjoying the season rather than worrying about mounting debt, helping you stay on track with your financial goals.

3. Opt for a loan that isn’t revolving. Opting for a low-rate loan, with a set start and end date, and a specific dollar amount for holiday shopping is a smart way to stay in control of your finances. Unlike credit cards, which can encourage overspending, a fixed loan gives you a clear budget, helping you avoid impulse purchases. The set repayment schedule ensures that you pay off the loan by a specific date, preventing lingering debt well into the new year. With a lower interest rate, you’ll also save money compared to high-interest credit cards, making it a more cost-effective option for holiday spending.
4. Keep Financial Wellness in Mind. At CSE our mission is to help you achieve financial well-being, not just during the holidays but year-round. We offer tools, resources, and financial education to guide you in making smart financial decisions. Instead of viewing the holidays as a time to spend beyond your means, consider them an opportunity to reinforce financial discipline, set a budget, and make mindful spending choices.
5. Financial Stress Isn’t Festive. Debt isn’t just a number on a piece of paper—it can affect your mental well-being. Studies show that financial stress can take a toll on your health, relationships, and overall quality of life. When the joy of giving turns into the anxiety of how you’re going to pay for it, the holiday spirit quickly fades. By going into debt to show love, you’re not only risking your financial stability, you’re also putting unnecessary strain on yourself and your loved ones.

There Are Better Ways to Show You Care

If you’re in a spot financially where going over budget this holiday season isn’t an option, think beyond material gifts when expressing your holiday cheer. Here are some alternative ways to show appreciation during the holidays:

1. Give the Gift of Time: Spend quality time with your loved ones. Plan a movie night, go for a winter walk, or cook a meal together. These moments create lasting memories without draining your bank account.
2. Create Something Personal: Handcrafted gifts like homemade treats, a heartfelt letter, or a photo album can be more meaningful than an expensive store-bought item. Your thoughtfulness will shine through to those who receive them.
3. Set Boundaries and Expectations: Talk openly with family and friends about budget-friendly holiday plans. Suggest drawing names for a gift exchange or setting spending limits that everyone can comfortably stick to.
4. Focus on Experiences, Not Things: Instead of buying individual gifts, consider organizing a group activity, such as going to a holiday play, ice skating, or volunteering together. Shared experiences often bring more joy than material possessions.
5. Contribute to a Future Goal: If you do decide to spend money on a gift, consider something that will help the recipient in the long run, such as contributing to a savings account, education fund, or even a charity donation in their name.

The holidays should be a time of joy, connection, and love…not financial stress. This holiday season, focus on what truly matters: the moments you share with your loved ones. The greatest gifts you can give are your time, attention, and thoughtfulness, none of which require maxing out a credit card. By staying financially responsible, you’ll set yourself up for a brighter, more prosperous new year.