Since 2009, American consumer spending on holiday gifts and expenses has increased annually. In the early fall of 2021, despite fears of higher prices, empty shelves, and a continuing pandemic, Americans told researchers at the National Federation of Retailers that they planned to spend about $1,000 on gifts, food, and decorations over the holiday season, or roughly the same amount they spent in 2020.
According to data from aggregate sales activity in the Mastercard payments network last year, from November 1 to December 24, holiday spending was up 8.5% overall compared to 2020 and 10.7% stronger than in 2019, before COVID.
Even more striking, E-commerce holiday sales in 2021 rose 61.4% compared to pre-pandemic levels.
Clearly, Americans in 2021 found ways to fight fear and spread cheer through the magic of increased consumer spending.
But in the cold light of January, when the tree is taken down and the ornaments back in their boxes, there is a dreaded financial hangover of personal debt from having spent too much.
For some, this debt could be a reason to panic. But for DECU members who recognize the signs of overspending, here are some reasons to breathe a bit easier as we share 5 Tips to Recover From a Spending Hangover.
1. Take A Big Picture
How much did you actually spend during the holidays? Gather your credit card statements, online invoices, and your cash receipts to calculate how much this Christmas cost you. Don’t forget that food and drink from the grocery store for holiday meals is also an expense, though travel costs like plane tickets and fuel are not considered holiday purchases.
If you use multiple credit cards, including retail store credit, it pays to research the interest rate for each and prioritize paying off the highest rates first.
Even more important is to remain within your monthly budget and not swing back too hard from the festive overspending of the previous months. Instead, seek ways to increase minimum payments on the most expensive forms of credit while managing debt and working to avoid fees and penalties associated with a spending hangover.
2. Create a Sustainable Budget
With new information comes new challenges. Once you know how much you owe from holiday spending, it’s time to dust off your old budget and start to make some changes.
If your salary and income are increasing in 2022 and you can cover your holiday debts, keep in mind that once your debts are paid, all that newly found money will need a place to go. Your budget should reflect a plan to save your updated earnings for future purposes.
But if you are still bringing in the same amount as every month last year, you will need to carve out and reprioritize where your money goes now in service of your debt.
Look for ways to pay lower interest rates on your most expensive credit cards, and despite the great January deals on offer, stop buying on credit and put your plastic payment options away until you’ve got a clear handle on your debt.
Likewise, if you expect a tax refund in the spring, you might consider how a lump sum in April can wipe out many lingering holiday debts in one swoop. Rather than committing your return to savings or a rainy day, use the money to get yourself out of the red and back on track.
3. Allow Yourself Some Room
Your budget can be divided into three groups: basic necessities, discretionary desires, and savings/debt management. Basic needs will consist of 50% of your budget like food, mortgage, and insurance, 30% for discretionary desires, covering everything from a hot cup of gourmet java at a coffee shop to a night out for dinner and a movie. The final 20% of your budget can be designated for savings and debt management.
Within this budget, you must not punish yourself but instead examine what from the category of discretionary desires can be taken away and listed under debt and savings so that your holiday hangover recovery goes smoother.
Allow yourself this self-payment in small doses, enough to help dissolve the pile of debt that smothers your budget.
Most important is to avoid reactionary spending that will complicate your payment strategy because it’s not altogether abnormal to overspend on the ones you love at Christmas time.
Relax, take a deep breath and spend your energy constructing a solution.
4. Unfollow Your Impulses
Impulse control for consumer shopping is a vital life skill. There are many attractive gift options during the holidays.
If you receive retailer emails promoting insider deals and special discounts in November, you are helping yourself with research. But if you don’t unsubscribe from those newsletters in January, you’ll likely find yourself tempted to spend again on things you might really want but that you probably don’t need and perhaps can’t afford.
Social media subscriptions can also be ‘Unfollowed,’ which can go a long way to prevent the impulses from getting in. Still, it’s altogether better to cut down your swiping and scrolling of feeds to avoid the targeted ads being pitched into your vision.
5. Get SMART
Regular readers of the DECU Daily know that time management is critical and financial goals are a year-round pursuit.
When measuring whether the financial goal of recovering from your holiday hangover is suitable to your needs, we recommend a simple self-test by asking yourself:
- When is the deadline to get it done?
- What can I do six months from now?
- What can I do six weeks from now?
- What can I do today?
This test can lead to more scrutiny of your goals, which is why we have a separate blog on Setting Financial Goals just for you.
DECU is here to help you start the new year off on the right foot with a fresh look at your financial goals.
Let January be the month you put into place a brand-new set of achievable benchmarks to master your money, deal with your debt and improve your credit score.