Are you experiencing the dreaded holiday spending hangover? The holidays bring a wide range of costs and expectations which can lead to overspending.
If you’re feeling the post-holiday pinch in your wallet, here’s a closer look at the recent holiday spending trends — and six ways to recover from overspending.
[Read: Inside the Psychology of Overspending and How to Stop.]
Holiday Spending Trends: How Much the Average American Spends
Gallup’s November 2024 survey found that Americans expected to spend an average of $1,012 on holiday gifts in 2024, up from $975 in 2023.
While it’s not uncommon for Americans to overspend during the holidays, many have been in a tough financial place due to rising costs and static incomes.
According to a 2024 PYMNTS survey, 67% of consumers went into the season living paycheck to paycheck. Without discretionary income to cover the holiday magic, overspending typically means going into debt.
[Tips to Avoid Living Paycheck to Paycheck]
“Millions of Americans are living paycheck to paycheck and just didn’t have the extra money to pay for holiday purchases,” Andrea Woroch, consumer and money-saving expert, said in an email.
“They also weren’t willing to sacrifice the season for their family and kids, so they took on debt to make it magical,” she said.
How to Recover From Overspending During the Holidays
If you went over your holiday budget, here are six steps you can take to get back on track:
1. Assess The Damage
Review your budget and holiday spending. Figure out how much you spent over the holidays and how it’s impacting your overall financial picture.
Did your savings take a hit? How much? Did you take on new debt? How much, and how long will it take you to pay it off?
“Start by gathering all your credit card statements and receipts from your holiday spending. Don’t just look at the total — categorize your spending to identify patterns. Were most charges for gifts? Entertainment? Travel?” Taylor Kovar, founder, CEO and certified financial planner at 11 Financial, said in an email.
The breakdown, he explained, can help you create a more targeted repayment strategy and identify areas for improvement next year.
2. Make a Debt Repayment Plan
Next comes damage control.
“Once you know how much you owe, set a debt repayment plan by identifying how much you can afford to pay toward your debt each month. Being realistic is important so you don’t burn yourself out,” Woroch said.
Kovar recommends the 50-30-20-10 budgeting method instead of a “cut everything” approach. “Put 50% of any extra money toward debt, 30% toward necessities, keep 20% for reasonable lifestyle maintenance – because extreme deprivation often backfires – and save 10% for your next holiday season,” he says.
[14 Easy Ways to Pay Off Debt]
3. Debt Consolidation
If you have multiple balances, consider debt consolidation. You may be able to consolidate multiple types of credit accounts with a personal loan, or multiple credit cards with a balance transfer card.
“A balance transfer card is a great tool to help you pay off your holiday debt fast. Zero percent balance transfer cards can give you up to 21 months to pay off debt without additional interest piling up so your entire payment goes towards reducing your balance,” Woroch said.
She explained that card providers charge a balance transfer fee of 3% to 5% but it’s often cheaper than what you’ll spend on interest. You typically need good or excellent credit to qualify for a balance transfer card, however.
4. Go On a No-Spend Diet
If you’re finding yourself short on money, consider going on a no-spend diet where you don’t spend money on anything beyond the essentials for a specific period, like a week or a month.
“Just like it’s advised by a health professional to go on a diet when you want to lose weight, you need to trim excessive spending if you want to shed debt,” Woroch said. “You’ll save much more during this period and that extra cash can help you pay down your balances faster.”
You can also apply the spending freeze to a certain category of spending.
“Choose one category each week (dining out, entertainment, clothing) for a no-spend challenge while maintaining normal spending in other areas,” Kovar said.
5. Try to Reduce Your Bills
Along with cutting spending on nonnecessities, look into reducing your bills.
“Assess your bills and figure out where you can make changes like cutting unnecessary add-ons on your primary services (like cable), canceling unused subscriptions, reducing your mobile data plan and increasing your insurance deductible,” Woroch said.
She also recommends services like Billshark which negotiates your bills for you.
6. Boost Your Income
Another option is to look for ways to increase your income, like picking up extra hours at work or doing work on the side. Possible side gigs include becoming a virtual tutor, delivery driver, pet sitter, writer or handyperson.
“Taking on a side hustle is a great way to boost your debt payments. Keep in mind, it isn’t something you have to do forever. Maybe you commit to just one month, or three, until you rid yourself of all your unwanted debt,” Woroch said.
How to Prevent Holiday Debt In The Future
Looking to avoid holiday debt in the upcoming year? Here are three preventative steps you can take.
1. Discuss Holiday Spending With Friends and Family
Talk about holiday spending with family and friends early. Everyone may feel obligated to give gifts, so perhaps you could do something creative instead.
For example, a group can do a white elephant gift exchange for the adults and individual gifts for the kids. You may also want to plan a potluck instead of shopping for and cooking an entire holiday meal yourself.
It can also help to figure out what expenses were most worth it in past years.
“Reflecting on how you and your family and kids felt and what was most important is another way to rid yourself of wasteful spending,” Woroch said.
2. Seek Professional Advice
It can be easy to get swept up in the emotions and pressures of the holidays. If you’d like help navigating it all, consider consulting a financial therapist. They can help you identify and address the underlying causes of overspending, and navigate conversations about gift expectations with family members.
3. Budget Early
Work out your Christmas budget now and examine the most recent holiday season. Include costs for special meals, hosting, traveling, outfits, gifts, decor and anything else you typically buy. Divide it by 12 and add it to your monthly budget as a mandatory expense.
“If one truly wants to make savings a priority, it cannot be a residual — what is left over. It should be a line item on your budget,” Robert R. Johnson, a chartered financial analyst and professor of finance at Creighton University’s Heider College of Business, said in an email.
“If you put away just $50 per month or $25 every other week, you will have $600 saved by December to help cover most of your purchases,” Woroch said.
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Spent Too Much on the Holidays? Here?s How to Manage a Debt Hangover originally appeared on usnews.com
Update 01/16/25: This story was published at an earlier date and has been updated with new information.