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Even before we can taste our Thanksgiving turkey, some of us have visions of sugar plums dancing in our heads. However, many shoppers are also being visited by the ghost of seasonal spending past. A Holiday budget can help with that.
Over 28 percent of credit card users are still paying off debt from last year’s gift shopping, according to NerdWallet. The good news is that this year’s figure is better than last year. In 2023 – 31 percent of card holders had not paid off the previous year’s holiday debt.
Spending Increase
All that comes as shoppers are expected to increase holiday spending 2.5 to 3.5 percent this year, according to the National Retail Federation (NRF). That would be $979.5 to $989 billion from November through December. Last year we dolled out $955.6 billion.
“The economy remains fundamentally healthy and continues to maintain its momentum heading into the final months of the year,” said Matthew Shay, NRF president and CEO. “The winter holidays are an important tradition to American families, and their capacity to spend will continue to be supported by a strong job market and wage growth.”
Wage Growth Supporting Spending
Shay’s comment on wage growth was echoed by – Paul Siegfried, senior vice president and credit card business leader at TransUnion.
“On the consumer front, lower inflation in recent quarters, combined with continued wage gains for consumers, may be driving consumers toward a financial equilibrium where they balance their monthly expenses and their monthly budget,” said Siegfried.
From September 2023 to September 2024, wages increased 3.8 percentaccording to the Bureau of Labor Statistics. Adjusted for inflation, the figure is 1.2 percent.
Credit Card Debt Slowing
Credit card balances were 6.9 percent higher at the end of the third quarter this year compared to 2023. However, that is down from the 15 percent increase seen last year, reports TransUnion.
“The moderated growth in balances is likely the result of a number of factors in combination. For example, looking at credit cards, lenders in many cases have tightened underwriting standards which may have resulted in lending to borrowers less likely to grow balances quickly,” said Michele Raneri, vice president of U.S. research and consulting at TransUnion.
On the 26th Day of Christmas . . .
Another factor that may affect holiday spending is that there will be five fewer days to shop between Thanksgiving and Christmas this year compared to last year. There will be only 26 shopping days this year, according to the NRF.
Much of that shopping will be done online. Non-store sales are projected to grow from $272.3 billion last year to between $295,1 and $297.9 billion in 2024. That is an 8 to 9 percent increase, reports NRF.
Adobe forecasts that 2024 holiday spending “is expected to be the most mobile of all time, with a record $128.1 billion spent through mobile devices at 53.2% share over desktop, while also propelling usage of Buy Now, Pay Later services.”
Discounts will drive much of consumer’s spending, according to Adobe. Those discounts are expected to run up to around 30 present.
“We remain optimistic about the pace of economic activity and growth projected in the second half of the year,” said Jack Kleinhenz, NRF chief economist. “Household finances are in good shape and an impetus for strong spending heading into the holiday season, though households will spend more cautiously.”
Avoiding Holiday Debt
No one wants to put the Bah Humbug on holiday spending. However, if you spread holiday cheer wisely, you will not wake up to spending regrets in the new year.
Sleepopolis found that 81 percent of participants in its 2024 holiday stress survey feel more stress during the holiday season than at other times. In addition, one in four respondents said they are feeling more stress this year compared to last year.
“Despite money being a key stressor year over year, it may be a bit surprising to see people don’t budget to help relieve some of the stress,” reports Sleepopolis. “Almost 23 percent of people are spending more than last year, and only 35 percent budget for holiday spending.”
Set a Holiday Budget
The cornerstone for managing holiday spending is setting a holiday budget.
“One of the more important pieces of holiday shopping advice is to take the time early in the season to set a realistic budget,” advises PNC Bank. “Consider how much you can comfortably spend without creating a financial strain.”
Like Santa, you may need to check your gift giving list twice – maybe more. Once your overall budget is set, PNC recommends assigning a spending cap to each individual on your gift list. You may have to trim those individual caps to fit your budget.
“This may take a few rounds to make the numbers work, but focus your attention on mindful gift-giving,” notes PNC.
Know Before You Go
Planning your shopping route can save you money and stress. Bank of America recommends shopping early and making use of technology to get the best deals.
“If you find a gift that’s over your budget,” advises BA, “use your phone to see if you can find a better price elsewhere. Many stores have price-match policies if you find a better deal.”
Creative Gifting
Many of us forget the old saying that “it’s the thought that counts” when buying holiday gifts. However, keeping that in mind can help you stay within your holiday budget. It can also lead to a better, more meaningful gift.
You might benefit from strength in numbers if you are thinking about a big ticket item for a parent or grandparent. Pooling money with relatives can get that expensive something without anyone going over budget.
Then there is DIY gifting. You can use a talent, such as painting, cooking, woodworking, knitting etc. to fill out your gift list. Your personal effort may mean more than any gift you could buy.
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