Holidays
Avoid a Holiday Spending Hangover
December 3, 2004STARTING OUT
By Erin Burt
When you were a kid, the holidays came easily -- Mom, Dad and Santa ran the show. All you had to do was crawl out of bed Christmas morning and a pile of gifts magically appeared under the tree.
But things are a little different now that you're on your own. With presents to buy, travel to arrange and parties to throw, shouldering the cost of the holidays is enough to turn even the jolliest elf into a Scrooge.
The seasonal squeeze for young adults is particularly tight. We're often caught between small salaries and big gift expectations from friends, family and small children. People with incomes between $30,000 and $50,000 say they'll spend $1,431 on the holidays this year, according to a recent study by Deloitte & Touche. For someone earning $40,000, that's well over half their December take-home pay after taxes.
In fact, nearly two-thirds of people ages 25 to 34 say they plan to exceed their budget this season and will celebrate the New Year under financial difficulty, according to LowerMyBills.com. Talk about a holiday hangover.
So if we know we're going to overspend, why do we do it?
"The holidays evoke a number of emotions ranging from anxiety and depression to excitement and anticipation," says Steve Blankenship, a financial planner in Grapevine, Texas. Throw in aggressive marketing techniques that play off those feelings and you have a recipe for money trouble.
Joshua Klapow, a clinical psychologist and associate professor at University of Alabama at Birmingham says people in their 20s also feel like they have to prove their success and their new-found independence. "Gift-giving becomes a larger statement than just the gift," he says. That can lead to shopping for too many people and spending more than one can afford in an effort to impress.
Know your limits
You have student loans, a rent or mortgage payment and some credit card debt. Just where is your holiday slush fund supposed to come from?
Unfortunately, many people turn to their credit cards and end up paying for gifts long after the recipient has forgotten them. At 18% interest, for example, $500 would take seven years to pay off -- and cost $365 extra -- if you paid the minimum each month.
Avoid going into debt by evaluating the number of gifts you buy and setting some guidelines.
For example, your family, roommates or co-workers could draw names so you each shop for one person. Or set a dollar limit on gifts so you don't feel uncomfortable when you give a $15 gift and get a $50 one in return. Consider giving group gifts -- instead of buying separate presents for your brother, his wife and their three kids, give them a game, movie or snack basket they can enjoy together.
Discussing gift expectations with friends and family needn't be awkward, says Klapow. If you're feeling the pressure, chances are others feel the same way. They'll probably be relieved to cut back on their shopping too.
If you have small children at home, it's also important to set limits. Many adults go overboard because they want to give their kids the Christmas they never had as a child, or live up to celebrations of their past. Perhaps spouses could scale back purchases for each other and use the money for the kids.
