“Look at the lights — what do you think, Bubba?”
Kaylee Koontz and her 15-month-old son, Everett, enjoyed the sights and sounds of Sioux City’s Holiday Lighted Parade on the Monday before Thanksgiving.
“It’s pretty spectacular," Koontz said. "I know my favorite last year was the Grinch."
Koontz won’t be a Grinch this year. She and her husband plan to spend $600 on gifts, food and transportation for family and friends this holiday season. The national average is a record $902 per person, according to the National Retail Federation.
“I have a stepdaughter too, and so we will probably spend at least $100 on the kids," Koontz said. "But my husband and I usually cut back a little bit during Christmas and spend it on each other the rest of the year."
With Black Friday almost here, the holiday season is an easy time for people to find themselves in debt and experiencing financial stress, according to Carol Ehlers, a human services specialist with Iowa State University Extension and Outreach.
"The important thing is to look for opportunities to better understand you and your money and the emotions around shopping," Ehlers said. "The joy of being able to find something special for a friend or a family member is very important too, but — it's important to be mindful of what we are spending and to think about opportunities to learn more about you and your money."
Ehlers recommends consumers spend no more than 1.5% of their income on gift-giving and other year-end purchases.
“Even if you're in the middle of shopping already, step back and think about that information from financial planners,” Ehlers said. “If we bring in annually, let's say, $35,000, limit spending to just over $500. But, if you haven't saved that much, it's really important to look for ways to actually trim your expenses.”
Koontz modified her habits since the birth of her child brought the need to buy a new vehicle.
“We are cutting back on gifts this year, and we're getting the essentials instead of going all out on the toys. It's lots of clothes, winter outfits, hats and mittens,” Koontz said. “We've already talked to family and we're like, ‘Hey, we're saving up for bigger things, so it probably won't be as spectacular this year.'"
Koontz’s sister-in-law, Olivia Koontz, said the extended family also agreed to a gift exchange instead of buying something for everyone.
“Money is very tight for me,” Olivia Koontz said. “I love Christmas. I think it’s a good time to just be with family. It’s not just about the presents to me.”
Ehlers also recommended people remain mindful of money, even with the extra pressure to overextend bank accounts.
“Holiday spending is about managing and being conscious about what's happening," she added. "And we do that best when we create that budget, make a list and use cash."
TransUnion’s Holiday Shopping Report showed more than half of people plan on spending the same amount as last year, with about 40% spending less.
“But what's something we need to pay attention to is the average American last year ran up their holiday spending debt to about $1,550 — and that's the highest it's been in an eight-year survey,” Ehlers said.
According to another national survey by NerdWallet, about a third of Americans still haven’t paid off their credit card debt since last Christmas. Ehlers said ISU Extension and Outreach offers Money Smart classes to get people back on track.
It's important to be mindful of what we are spending.Carol Ehlers, ISU Extension and Outreach
“We invite people to seek us out after the busy holiday,” Ehlers said. “We really want to encourage everyone just to take a breath and step back and think about some money-smart holiday spending management techniques or strategies that will help get you through this season."
Kaylee Koontz said that even with a tighter pocketbook this year, she plans to reach out to others who are less fortunate.
“I am also taking the time to adopt some families and give gifts to others, regardless of cutting back at home,” she said.
More holiday shopping tips:
- Create a holiday budget. Figure out how much you can afford to spend this holiday season without going into debt. Financial planners recommend spending less than 1.5% of your annual income on holiday expenses.
- Make a list and check it twice. Prepare a detailed gift list with a set amount to spend, keeping track of what is spent. Research indicates consumers reduce their food expenses by 20% or more by using a shopping list, and this may apply to other holiday spending categories as well.
- Use cash, not credit. One way to do this is by using the envelope method. Make one envelope for each person and only put in what you plan to spend. If credit is necessary, charge only the amount you can safely repay in a few months. Limit your charges to one card with the lowest interest rate and fees. Keep all receipts.
Learn more about holiday spending from ISU Extension and Outreach's Smart Money series.
