Whose Christmas costs more?

thWhen it comes to paying off holiday debts, who finishes last? If you guessed “low-income shoppers,” you guessed wrong. According to a study from the NerdWallet personal finance site, the middle class takes longer than anyone else to finish paying off Christmas costs.

People who earn from $50k to $75k take an average of 2.6 months to cover holiday celebrations. Compare that to folks who earn $50k or less and take an average of two months.

“Those who spend more in an effort to ‘keep up’ end up paying the price later,” says Matthew Ong, senior retail analyst at NerdWallet.

“Middle-class households could end up in a risky position this holiday season if they have ample credit to make purchases but incomes too thin to comfortably pay the bills later.”


We keep hearing about the “squeezed” middle class. In this case it appears they’re offering themselves up for compression: Christmas costs more than they can afford to pay cash for, and thus ponying up more in credit-card interest.

Personally, I believe you shouldn’t buy more than you can afford, period. But more on that in a minute.


Why we lose it during the holidays

Some may routinely go into debt each December. (Hint: Don’t do that.) Others have had to stretch stagnant wages to cover rapid increases in certain basic living expenses, but don’t want to downsize their vision of the holiday season.

Possibly this is done out of love and nostalgia: We’ve ALWAYS driven three states over to the extended-family holiday, bearing gifts for the entire clan. It’s a TRADITION.

Others, tired of the struggle and drunk on Black Friday ads, may think, “Dammit! We’ve done without all year. My kids are getting bikes and iPads!”

Totally understandable. Totally ill-advised.

“We like to feel generous by giving nice gifts. We get focused on the good feelings of being generous rather than the miserly feelings of, ‘I can spend only this amount of money’,” says psychotherapist Kate Levinson, author of “Emotional Currency: A Woman’s Guide to Building a Healthy Relationship With Money.”


The true (and complicated) costs

Sometimes overspending is done with love, e.g., we don’t want our kids to miss having the same clothes and gadgets and pastimes their friends have.

But it might also be out of anxiety: that if we don’t match extended family members gift for gift then we’ll be seen as less successful, or that if we don’t provide lots of presents then people won’t love us.

That last thought is usually “out of our awareness,” Levinson says, and stems from a feeling that we’re not good enough or there’s something wrong with us. “We try to compensate for that feeling by doing lots of good things.”

You know what’s not a good thing? Wrecking your finances for one relatively brief whirlwind of unwrapping. An overextended Christmas hurts you in several ways:

Busted budget. That money had to come from somewhere. What did you do without in order to buy your kid that Zoomer Interactive Dino, and how will you make up for it later?

Overpayment of interest. If it takes almost three months to pay off Christmas costs, how much did you really wind up spending? Bonus bummer points if car or home repairs pop up in January, further delaying repayment.

Opportunity cost. The interest you overpay plus the cost of too many gifts add up to money you’ll never see again. Or maybe you “find” holiday money in your budget by not paying extra on your mortgage or student loans, or by cutting back on contributions to retirement.


What drives the dysfunction?

Again, it’s completely understandable that you want to celebrate with gifts and special foods. But a celebration paid for with money you haven’t yet earned means paying more than you must. Maybe a lot more.

Do you find yourself overdoing it and then dreading the January bills? I’d suggest reading Levinson’s book in an attempt to discover what’s driving your December dysfunction.

Maybe there’s nothing wrong with you emotionally. Could be that you, like me, tend to respond to the annual round of ads and images designed to open your wallet. I have to police my own spending each year’s-end, because I know that Christmas carols and pictures of kids playing with toys turn me into an irrational puddle of sentiment. If I’m not careful, my Christmas costs more.

That’s especially true right now because I can’t afford to be as generous as in years past. that means I really need to be careful. An eleventh-hour bout of shopping could mean some opportunity cost of my own. (For example, I’ve put only $1,800 in my Roth IRA this year.)

Right now I’m keeping this thought from Levinson in mind:

“Things are not the answer. Things are great, but they aren’t love and they aren’t acceptance and they aren’t inclusion and they aren’t wholeness.”

Readers: Do you buy more than you can afford to pay off immediately? Why or why not?


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  1. Ro in San Diego

    My husband’s sister and our combined families used to get together for an annual celebration; usually at her house.

    Over the years attending this celebration has become more and more difficult. Since we are living farther away attending the event involves renting hotel meals and many meals on the road which are not cheap. So, we don’t attend. Instead my husband picked up the phone and called his sister to wish her a happy holidays.

    Without going into detail the trip across our state to attend her event each year cost us over $1K and the last time we attended it was a fiasco. When we got in the car after the event I announced that we weren’t going to do it again and I meant it.

    It’s been two years now. The compromise the hostess decided upon was a visit to our home after the holidays. Since our hostess was definitely stressed by preparing a large holiday meal this compromise will work better for us.

    We no longer make a big production at Thanksgiving – we just share that day with our immediate family and possibly a friend of our son’s who might want a snack the day afterwards. And since our son is away at school for several more years we’ve offered the compromise to fix the holiday meal for him at his home every other year.

    After years of giving in to the family “tradition” that was costing us time, money, and emotional trauma we’ve just learned to say “no”.

    We never miss the annual family reunion to which all of our extended family members are invited. Once a year visiting is much easier on our budget and our sanity.

    • Donna Freedman

      That sounds like a reasonable compromise — and one more likely to preserve your sanity as well as your budget. Thanks for sharing the fact that it really is possible to say “no” to something vs. being sucked in by the wails of “But it’s FAAAAAAMILY!” or, worse, “But it’s a TRADITION!”

  2. Ro in San Diego

    That should have been hotel rooms.

  3. Our situation is a bit different than Ro’s. As we have gotten older we appreciate the Holidays more for getting together with the family then for the gifts. Sure it can be a hassle but it’s good catching up with everyone….crazy or not. As for the gift buying, that too has changed. Not so long ago we would pack up the DD’s and get up 3AM for Black Friday. Well DD1 is married and has her own family and basically does her own thing….DD2 will be out West on Black Friday visiting with her “very special guy”. That leaves DW and I to fend for ourselves on Thanksgiving and BF….and it’s great. Have Family up for Thanksgiving at our house and the more the merrier. It’s great catching up…As for Black Friday… No pressure…. we go later, tend to “soak” up the day, shop prudently and stop on the way home for a good meal out…with gift cards from rewards….Really, we need very little. Our job now seems to be to spoil the grandchildren….As for material things I think we have reached a “saturation point”…How much fleece from The Gap does one person need???

    • Donna Freedman

      Hear, hear! Glad you and DW are creating your own traditions. And you’re right: Plenty of people don’t need a thing, yet we keep giving them stuff. What’s up with that?

  4. “People who earn from $50k to $75k take an average of 2.6 months to finish paying for holiday expenses.”

    That is crazy!!

    Spending time with people you love (not money on consumer crap!) is what the holidays are for. People seem to have well and truly forgotten that!

  5. I don’t spend a dime above what I have saved.

    I’m not kidding when I say I’ve been saving for Christmas since grade school. I’d get a $2 allowance & save $1 for Christmas every week. For some bizzare reason, that was my goal as a kid. I felt so proud to be able to spend MY money on mom & dad. Since then, I’ve continued to save a little every payday. I set a budget, i.e. $400, & divide it by the # of paydays leading up to Christmas. That budget includes gifts, theatre tickets, cards/postage, wrapping supplies, shipping, etc. If I come across extra money, like my $75 paypal cashout from Swagbucks this year, that pads my savings to allow a little splurging.

    Granted, I don’t have children to buy for, but I suspect my habit of saving ahead wouldn’t change much if I did since I’ve been doing it for 20 years (unless I was in a financial strap, and even then I wouldn’t want to use a CC.. never have).

  6. The holidays are low-key around here. Ever since stores started opening on the holidays, my family members are forced to work, so we don’t get the chance to celebrate together. Our family is spread out all over the states, and only a select few can even request the time off for a get-together anyway.
    And as a sidebar, I refuse to shop at those stores any more who do not value family time, so it solves the problem of overspending.
    What we do instead to have our family holiday is share an experience together, like going to a play or a movie and dinner AFTER the holidays are over. I hate that we cannot sit down as a family on Thanksgiving, or open gifts on Christmas morning, but hey……it does save a lot of time and money, and none of us are in debt.

  7. I have always over spent on my children at Christmas. I always wanted to make up for their Dad either sending nothing or a card with $25/$50. Now that they are 25 (married) & 21 (college)I have decided that it is time to cut back. I will be there for the fun, food and festivities but I am not worried about the 30 presents under the tree! This year was a big year with my daughter getting married and the budget that I gave for my $ went over by almost double. I am purchasing a used car for my son because his car died and he needs one to travel to school. I am going to have a wonderful Thanksgiving with them and tell them my plans.

    • Donna Freedman

      Good idea. That way they won’t be surprised. Maybe a little disappointed, but as you point out: They’re adults now.
      I hope you’ll use the money you don’t spend each year to shore up your own retirement and EF, and maybe treat yourself now and then.
      Thanks for reading, and for leaving a comment.

  8. My motto for this year is good enough. I mean it too. While I will have spent over $1000 on Christmas this year, it was all free money that I gleaned from the system. It just takes planning.
    Even Den, the spender in the house is fine with this. I’m making little gifts and then I’m saying good enough. If its less than last year, oh well. Maybe this will be the year that I enjoy the holiday and am not stressed out. Or maybe I’ll just have that extra drink and not really care when the family is here.

  9. This is my first year single after divorce, and I honestly hadn’t thought about gifts. I’m going camping with a dear friend for Thanksgiving – though I also goofed up and bought some things for a holiday dinner, so I’m not sure what I’ll do about that.

    I’m a full time student, which limits the budget. But, I’m also just kind of over … well, everything, at this point – all I can think about is getting through my finals. Maybe I’ll send out an email and let everyone know I’m thinking of them (instead of buying them gifts, lol).

    • Donna Freedman

      I was a midlife college student and I remember that holiday celebrations seemed…exhausting. I did wind up making a turkey, though, because it was so cheap! Got tons of meals out of it and it turned out that having my daughter and a friend (and later, my daughter and her fiance) over to eat was a nice thing.
      But since this is your first year after divorce plus you’re in school, I’d suggest doing what feels right for you. You can always cook for yourself, or freeze some of the ingredients for later.
      Focus on school and let the rest of it wait until later, if that’s what will work best for you.
      Good luck with your finals. (Hint: You know a lot more than you think you know.)

  10. Insurance Gal aka Iggy

    Several years ago, my sister found an online Secret Santa gift exchange for our family of 7. We set a price limit of $30, and the system draws names for us. Each person can complete an online wish list, which our “Santa” can use for ideas. We also buy inexpensive stocking stuffers for each other ($1 Target bin items, lip gloss, small candles, mini flashlights, beef jerky, etc). It is so much fun! I use coupons when available, and save up freebies throughout the year.

    I set a cash budget of $300 for EVERYONE on my list, including husband, and small items for just a few out of town family and close friends. The $300 includes postage. This is much unlike years ago, prior to the BK, when I charged several thousands on my credit cards. Never again! 🙂

  11. I have no debt except for my mortgage. I now have a healthy emergency fund plus a little extra. I am in a better financial position than I have been for years so I am going to spend a little extra this Christmas, buying some decorations for the house, some nice food items and a few gifts, including one for myself. This is a first for me after years of single parenting and frugality. I rarely treat myself!!

  12. I usually start shopping in September, so I’m able to spread the costs over a few months instead of doing it all on credit in December.

    I also like to do a craft of some sort to get some of the smaller gifts (like co-workers, relatives and friends where I *need* to give a gift but where finding the perfect gift for that person is difficult). I might spend 60$ on supplies but then I can do a dozen of that gift so it works out around $5 each. I wouldn’t be able to find something for $5 for these people if I was buying, I’d probably be buying a lot of different things in the $10-15 range.

    This year I’m doing very pretty fabric quilted Christmas ornaments, in the past I have done cookie mix in mason jars, etc.

    I convinced my mother a few years ago to open an ING account where a set amount goes every month and she uses that money to pay off her credit card in full in January for the holiday purchases. It works for her.

  13. OK, I went to the Best Buy mother store in Minnesota today (Monday about noon) to buy a computer cable. There are already three tents set up in line for the Black Friday deals.

    What is happening to us that we suffer cold (and it is cold here) to buy things? Those tents, the first from REI, should be used for camping in the cold for a true experience and not for waiting in line for electronics.

    I am sad that holidays get polluted with consumerism.

    • I agree with you! You can see evidence of various holidays’ creep on The Consumerist blogsite. As far as retailers being open for business on Thanksgiving, they would not do it if there was no demand…

      • I refuse to patronize stores that are open on Thanksgiving. Within reason, of course… kind of hard to avoid the gas station and the 7-11…

  14. I NEVER, ever pay for anything with a charge card that I could not pay for just as easily with a check or debit card. Does NOT matter if it is everyday gasoline or holiday gifts

    • I charge everything over $10 and pay it off at the end of the month. I do this to make about $200-$300 extra a year on cash back rewards. It is an excellent bookkeeping system!

  15. This year the best gifts I’ve found have been at thrift stores, second-hand stores (though they call themselves antique stores) and a Friends of the Library bookstore, the only bookstore of any kind left in my small town. (That is just wrong, and sad.) So, I spent time and thought, but not much money. One year I found a very old spatula from the ’30s with a once painted wooden handle. I sanded off the little remaining paint and then put tung oil on it to make it water-resistant, and to preserve the wood. I gave it to my younger brother, who said later that he thought that gift had real love in it. (He had asked for kitchen items.)

    I wish I had more time, so I could make things for friends and family. That’s what Americans used to do, more often than not. I know I value the handmade things more, like the quilt my grandmother made with extra scraps of material, and which I used in my college dorm all through school. I still have it, and always will, I hope.

    This year I took a gift wish tag off the YMCA tree, and the wish was for pens and paper pads, “writing stuff.” Boy is she going to be surprised. She is getting a fountain pen and ballpoint pen set, with ink, and some notebooks and writing pads. That is a wish I can really understand. I am looking forward to wrapping that gift, more than any.

    I like the thought process that goes into selecting gifts, more than anything else. I hope no one minds that some of what they’re getting is not brand new. I know it wouldn’t matter to me.

  16. Cathy in NJ

    When I was a child we celebrated two Christmases. American Christmas on the 25th and Russian Christmas on January 7th. I got about 3 presents on the 25th and 1 present on the 7th. Over the years the Christmases have focused on the 25th. So my family tradition is not to go overboard because just when you thought it was safe another Christmas celebration was coming. When I would go back to school and say I got 3 presents and everyone else got 20, I would say I have another Christmas coming on the 7th and the peer pressure was diffused. It must have been a parental conspiracy because the other kids at church did not get mountains of presents either. So I guess as a result, I buy modestly and have always paid Christmas gifts off before I was charged credit card interest.

  17. Heather M

    I definitely overspent as a new parent. Christmases in my house were always over the top (or did it just feel that way as a young kid?). I felt I needed to give my kids Christmases like I remembered. As we added to our family and now have four children, it’s become impossible to give them so many gifts. I now make the children gifts, and spent time in the months preceding Christmas scanning the shelves of thrift stores and searching ebay for suitable second hand gifts. It’s a relief to not spend so much and I think the kids actually like it more now that we spend more time on traditions and less on consumerism. Thinking back, there are very few specific gifts I remember, what I do remember is decorating the tree, making cookies and my mom’s Jewish coffee cake on Christmas morning.


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