Don’t Let Holiday Spending Derail Your Financial Goals

We have reached that time of year when retailers finally go into the black and become profitable while many Americans go into the red, having spent more than their income level might allow. Unfortunately, our combination of generosity and appetite for the latest goodies leads many consumers to significantly overspend during the holiday season.

According to, more than 1 in 3 consumers said they spent more than they can afford this holiday.  Additionally, 36 percent of Americans used debt to finance the holidays, owing an average of $1,249 on credit cards. The challenge is that excessive spending, finance costs and interest expenses can cause many consumers to end up paying for 2021 holiday expenses for years to come.

The true cost of debt

For those consumers who overextend themselves and choose to finance their holiday spending with store credit cards or traditional credit cards, interest costs can add up quick. So, what is the true cost of financing your purchases this season? According to, the average interest rate on a cash-back credit card is 16.30 percent. Assuming you finance $1,249 in spending and make minimum monthly payments, you could end up paying this year’s holiday expenses for more than 4 - 5 years.  In fact, statistics from LendingTree suggest that 82 percent of those with holiday debt won’t pay it off within a month and instead, will carry the debt into the future.

It is also important to consider existing debt as well.  According to Federal Reserve statistics, total outstanding credit card debt in the United States is over $800 billion with the average American household having $6,270 in credit card debt.  Adding additional holiday debt on top of that can make it even more difficult.  Remember, the more debt you have, the larger your payments become and the harder it is to keep your head above water. Unfortunately, this leads many consumers to mishandle their debt, causing significant damage to their credit score and their financial position. Keep in mind that a lower credit score can lead to higher interest costs which in turn may lead to higher levels of debt – a truly vicious cycle.

How to avoid a holiday spending hangover

Having a plan to handle the spending demands of the holidays can be tricky. Remember, analyzing and monitoring your budget is critical to reducing debt. If you want to work your way out of debt, you will also need to avoid incurring any new debt. While this is easier said than done, you need to balance your budget to make sure that you do not continue spending more than you are bringing in. Consider using and other online budgeting calculators to create and monitor your budget each month while also reducing expenses. Developing a post-holiday budget and holding yourself accountable to a payoff plan is an important first step.

Consolidate debt

Consolidating your debt through low-cost and low-interest balance transfers can help speed up the process of paying of your debt. Consider visiting to research low-interest offers from multiple credit card companies. Remember, one of the benefits of our current low interest rate environment is that you may be able to restructure your debt and save money. Transferring high interest cards to a 0 percent offer could significantly reduce your financing costs.

Don’t forget to review the fine print as many credit companies offer introductory terms that will increase later on. Also be careful of excessive balance transfer fees.

Finally, consider negotiating with your current credit card companies to obtain lower rates. Almost everything is negotiable, including your credit cards. Making the switch to lower interest cards may shorten the time required to pay off your debts.

Pretend your raise never happened

As our economy begins to stabilize and improve, more and more workers may begin to see increases in compensation, especially due to inflationary pressures. If you are fortunate enough to receive a raise, consider pretending it never happened.

Instead, continue to live on your pre-raise income and pay off your debt with the additional funds. While this takes extreme discipline, if you can pull it off over a few years you could really make a significant dent in your debt, changing the trajectory of your financial life.

Dealing with the financial challenges of the holiday season can be challenging. Consider taking a proactive approach to developing a post-holiday budget in order to limit the impacts of holiday spending on the achievement of your long-term goals. Consider visiting for more information on your credit score. Since everyone’s financial situation is unique, consider speaking to your financial and legal adviser to determine the most appropriate approach for you.


Kurt J. Rossi, MBA, CFP®, AIF® is a CERTIFIED FINANCIAL PLANNER & Wealth Advisor.  He can be reached for questions at 732-280-7550, & LPL Financial Member FINRA/SIPC.