14 Surprising Ways Your Christmas Spending Habits Are Setting You Up for Financial Disaster

Joy is what the holiday season is about, but that doesn’t mean it can’t be the perfect storm for financial pitfalls for many. Every year, millions of people rack up credit card bills they can’t afford to pay, overspend on gifts, and go into debt. The spirit of giving and festive pressure compel us to make decisions we might regret in January. In fact, what’s even more surprising is that these seemingly harmless habits can have lasting financial consequences.

The problem is, it’s easy to get sucked into the season’s magic, buying gifts and holiday essentials without realizing just how much they’re going to set you back. Some of your Christmas spending habits aren’t just leaving you with a post holiday hangover, they could also be knocking you into financial trouble for the long term. Here are 14 eye opening ways in which your Christmas spending is placing your future financial health at risk.

Overindulging in Non-Essential Purchases

When it comes to gift giving, there can be a lot of pressure to get the ‘perfect gift’ for everyone in your life, and often, that pressure leads to overspending on things that aren’t necessary. Perhaps it’s the latest tech gadget, designer clothes or extravagant experiences. You can easily convince yourself that ‘this year’s different’ but when the festive cheer dies down, these extravagant purchases can leave you wishing you’d spent that money on something more meaningful.

Forgetting to Compare Prices

In the holiday rush, it’s easy to grab something quickly without doing your due diligence. But if you don’t shop around, you could pay much more than you have to. A little bit of research can save you a lot of money. The extra time spent doing your holiday shopping around can save you from spending too much on gifts or other holiday extras, and get you better deals.

Chasing the “Christmas Spirit” with Extravagant Parties

Hosting a big holiday party can break the bank. Throwing a party can be an expensive affair from catering to decorations, drinks, and entertainment. Though spreading cheer is important, scaling down lavish gatherings and narrowing down special celebrations to smaller, more intimate gatherings can save money all the while retaining the festive spirit.

Falling for Holiday Discounts

During the holidays, it’s tempting to fall for those “amazing deals” and limited time offers, but they are designed to make you overspend. Promotions and discounts can create that fear of missing out, where you’re buying things that you don’t need and thinking that you’re saving money. In reality, the more you ‘save’, the more you may just wind up spending on unnecessary things.

Ignoring the Impact of Small Purchases

Those little things—the overpriced wrapping paper, the extra holiday candles, the last minute stocking stuffers—they can sneak up on you. At first glance, they actually seem harmless, but these small expenses add up quickly and you’ll never realize how much until it’s too late. Before you know it, the holidays are over and your wallet is surprisingly lighter thanks to those seemingly small purchases that creep up on you. These costs can be the difference between staying on budget and regretting it later.

Buying Gifts with No Thought of the Future

Christmas gifts are a big thing, but they can be a recipe for disaster if you buy them without considering the long term financial consequences. The excitement of finding the perfect gift is easy to get caught up in, but when you add up the cost of all your purchases, you may end up having more debt than you expected. A Deloitte study found that the average American spends $1,400 on gifts during the holiday season. Using credit to pay for gifts means that debt can linger for months after the holidays are over.

Not Setting a Spending Limit

Not setting a spending limit is probably one of the biggest reasons for Christmas financial stress. With there’s no budget in sight, it’s easy to overspend on gifts, meals, and decorations. Setting a clear spending limit helps to avoid financial regret and puts you on a plan your wallet can handle. Sure, you’ll have to cut some things back, but it’s much better than getting into financial stress later on.

Neglecting to Plan for Post-Holiday Expenses

Most people forget to budget for the aftermath of the holiday season. January is a reality check for expenses: It’s also a time to pay off credit card bills, higher utility costs from all those twinkling lights and other unexpected New Year’s celebration expenses. The American Psychological Association says that after the holidays about 58 percent of Americans are stressed about their finances during the holidays. If you don’t add these unaccounted for costs up, and you don’t have a solid plan for the post-holiday season, you could find yourself digging yourself into a deeper financial hole.

Skipping the Emergency Fund

People are so busy spending during the holidays that they tend to forget to save for something else: an emergency fund. It’s a huge risk not to have an emergency fund during this time of year. In fact, over 40% of Americans would have to rely on a credit card or loan if they had an unexpected expense. Holidays should be a time of joy, not a time of stress wondering what you would do if an emergency occurred. You don’t need an emergency fund to be a huge one, but starting one can really help when unexpected costs pop up.

Relying on Credit Cards

You can easily add a few extra purchases to the credit card, telling yourself you’ll pay it off next month, but it’s a slippery slope. Credit card interest rates tend to be high, and if you have a small balance, it can grow into a massive amount of debt, and if you make only the minimum payment, it can take years to break that cycle with the climbing interest rates which can make the debt snowball even faster. However, what can seem like an easy and convenient solution during the holidays might end up costing you much more in the long run.

Spending Beyond Your Means

The holiday season is one that can mess with the mind and make you believe that you can purchase the world for all you know. Have you ever thought about if you can really afford to buy gifts and decorations? It’s easy to justify some little splurge with credit cards, but that debt really adds up quickly and you find yourself with massive balances that can take months or even years to pay off. It’s far too easy to fall into the trap of spending today and worrying about tomorrow, only to be hit hard by those credit card bills in January.

Making Unrealistic New Year’s Resolutions

You may have convinced yourself that January is the month you’re going to ‘get it together’ financially. However, most New Year’s resolutions to improve finances are overly optimistic and do not last. According to studies, only 8 percent of people who make financial resolutions ever achieve it. Instead of making a drastic promise, make small, achievable goals. If you’re having trouble saving money, first start by tracking your spending, creating a budget, or paying off credit card debt little by little. Small steps are the only ones that lead to lasting change – over the top resolutions set you up for failure.

Not Planning for Holiday Travel Costs

One of the biggest expenses is traveling during the holidays, but most people don’t plan for it. Accommodations, flights, and transportation costs can easily consume a significant part of your budget. According to a study from the U.S. Travel Association, Americans spent an average of $1,984 on holiday travel. That’s not even counting the cost of meals, gifts and other expenses while you’re away. Travel is one of the biggest holiday cost, so you need to budget for it well in advance.

Overlooking the Long-Term Impact on Your Credit Score

Credit holiday spending can creep up on your financial health. High balances as a percentage of your credit limit can damage your credit score, an indispensable part of getting future loans or any financial opportunity. The key to avoiding long term consequences from festive indulgence is keeping balances low and paying them off promptly.

Disclaimer: This list is solely the author’s opinion based on research and publicly available information.

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