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Holiday Spending Habits and Potential Pitfalls

by on November 26, 2017 5:00 AM

By Brittany N. Cox, Associate Advisor at Nestlerode & Loy, Inc.

As I am preparing lists of things to watch for as the sale flyers and emails pour in this week, I couldn’t help but wonder, “How much do people spend during the holidays?” I can only assume there are some people who save all year and then go out on spending sprees with their savings, some who open credit cards for the incentives being offered and use them to shop, and others who carefully and thoughtfully create a budget for their holiday spending.

My curiosity was quelled when I found a survey done by Deloitte that gives a vast amount of information on holiday shopping.

According to the survey, holiday shopping accounts for more than one quarter of annual U.S. retail sales. Spending expectations for the holidays continue to rise, partly due to improved household finances. About 80 percent of shoppers expect to spend the same or more over the holidays this year. The average amount expected to be spent by each household during the holiday shopping season for 2017 is $1,226. The holiday shopping season involves 126 million households, more than $1 trillion in retail sales and more than $110 billion in online sales.

One fact that shocked me when reading the survey is that actual gifts only account for one third of average holiday spending. Most of the average holiday shopper’s money is going toward non-gift purchases and experiences such as clothing for oneself, entertaining guests, socializing and home furnishings. While shopping for gifts, shoppers are likely intrigued by sales on other items that appeal to them personally and want to capitalize on the deals. Often this includes unnecessary or unneeded items.

So, where are people getting this extra money to spend during the holidays?

As I mentioned, there are many types of shoppers. The first I want to discuss is the credit card shopper. On average, Americans add about $986 in debt over the holidays. Eighty percent of those who use forms of debt to finance their holiday spending use credit cards. This is an easy trap to fall into as you walk to the register with arms full of items and the clerk asks you if you’d like to open a credit card today and save an extra 10 percent on your total purchase.

This sounds quite enticing, unless you ask the interest rate on that card. Most store cards carry an interest rate of at least 20 percent. So, unless you pay off that card when you make the purchase, you can say goodbye to that 10 percent savings you received at the register.

Another thing to be cautious about when applying for store credit cards is providing your information. Some consumers may find that their information is being shared with other third-party companies for marketing mailing lists. Also, many stores will set up tables or booths in the store trying to get people to sign up for a store card. I am leery of these set ups in the middle of a store since you are providing sensitive personal information in an open area to people who are often temporary or seasonal employees who may or may not have proper background checks. Always be cautious when providing your personal information.

Something to consider as you prepare for holiday shopping is not trying to “keep up with the Joneses”. Spending outside your means or creating debt will only create hardships and extra payments in the future. Many holiday shoppers open up credit cards thinking they will pay them off right away or make payments until next year and use those cards again. Then the bills begin to pile up in January and it is overwhelming. Spending outside your means will not create any reward, but creating a budget can!

Creating a budget that you can maintain and afford is the best way to manage your holiday spending. The idea of saving up all year is appealing since you will know how much you have to spend and you can then create lists for the gifts you need or want to purchase and create a budget for each. This makes shopping the holiday fliers and emails more rewarding as well.

As holiday shopping  goes into high gear, have a plan for how much you are able to spend, avoid getting into debt that you are unable to maintain, and be smart about your spending while out and about. Of course, it is important to always be cautious with your personal information, but be extra careful this time of year when it’s so easy to become distracted. Most importantly, take a moment to breathe and enjoy time spent with friends and family. That is one of the nicest gifts the season brings!


Brittany Cox is a Registered Investment Advisor who works for Nestlerode & Loy, Inc., State College. She serves clients in Centre County and all of Pennsylvania as a fiduciary, fee-based advisor. She is a graduate of the Pennsylvania State University with a BA in business with a focus on financial services. Brittany enjoys working with clients for retirement and college planning. Brittany can be reached at [email protected]
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