7 in 10 Americans stressed over holiday spending, study finds

Increased spending and higher credit card balances and making most Americans stressed about their finances this holiday season.

Four out of 10 credit card owners are currently carrying more on their credit than they were at this time in 2022, and 54% say they typically do not pay off their balance in full every month, according to a survey conducted by D.A Davidson. Yet 37% of men and 27% of women expect to spend more on gifts for family and friends this year than they did last year.

This is likely contributing to 71% of those planning to celebrate the holidays in 2023 feeling stressed about their upcoming holiday spending, said Andrew Crowell, vice chairman of wealth management at D.A. Davidson.

Inflation impact cited

Inflation could be one of the culprits, Crowell said. People are charging more to their credit cards and carrying a balance into the next month during the highest interest rates in 20 years, likely making people feel it will be even harder to pull out of that eventual debt. The restart of student loans payments could be another factor, as it’s a large recurring expense that some may have stopped accounting for, as well as the increased cost of many consumer goods.

However, this creates an excellent opportunity for financial advisors to engage with clients and calm some nerves, Crowell said.

“Our industry has changed quite a bit over the past 20-plus years, and more advisors are doing holistic wealth planning rather than just investment selection and asset allocation,” he told InsuranceNewsNet.

Those who do should have a good idea of a client’s liabilities, including credit card debt, and can use that to start reaching out, Crowell added. “Clients you know have outstanding credit card balances, start with those folks and see if they’ve started with a holiday budget or not.”

Holiday financial stress can also create a way to start the planning process for clients who have held out. Crowell recalls a client who once called asking to cash out her IRA before retirement age to cover $17,000 in credit card debt that he didn’t know about. Once he knew about the debt, he could make a financial plan to effectively address the issue without emptying a retirement savings account.

Advisors helps clients plan ahead

Some advisors help clients plan ahead and prepare for the holidays. For example, advisors can set up an account at the beginning of each year earmarked for holiday spending, said Assunta McLane, managing partner of Summit Place Financial Advisors, a registered investment advisor in Summit, New Jersey.

“You can contribute to this account each month or directly from every paycheck,” McLane said in an email. “Once the automatic deposits are set up, it’s out of sight out of mind and you will be surprised by how much you accumulate over time.”

Another way advisors can be helpful this time of year is by recommending smart giving strategies to philanthropically inclined clients, Crowell said. In lieu of large cash gifts, advisors can help clients donate appreciated stock shares. This could help clients donate without touching their checking account while also avoiding some capital gains taxes.

Those who celebrate the holidays are four times more likely to expect to spend the most on gifts compared with dining out, social events and travel, D.A. Davidson’s survey found. However, the pressure to host gatherings and participate in holiday activities can all add up to some overspending and financial stress, said Ashley Folkes, the founder and managing partner of Inspired Wealth Solutions, a Cetera-affiliated wealth management firm in Hoover, Alabama.

Holiday spending has lasting effect

“A substantial number of individuals find themselves dealing with debt and financial challenges well into the new year due to holiday-related expenses,” Hoover said in an email. “I tell clients to be honest about what they can afford without compromising their financial well-being.”

Establishing a practical budget for the holiday season is crucial for alleviating financial stress, Hoover added. The good news is that 35% of Americans have already budgeted for holiday spending, and another 36% plan to create one, according to D.A. Davidson’s research.

Many Americans are also taking steps to cut back on spending. Two-thirds of survey respondents plan to take advantage of sales, while 46% plan on buying less.

One thing advisors can remind clients is that the value of gifts is not judged by its price tag, Hoover said.

“Prioritize thoughtful and meaningful gift-giving over extravagant presents,” he added. “Explore imaginative and budget-friendly ways to celebrate the season.”

“Beyond the material aspects, the holiday season provides a unique chance to impart values, traditions, and memories that can be cherished for generations.”

Ryan W. Neal has more than 14 years of experience as a reporter, including nine years covering the financial services industry. He formerly served as technology editor at Investment News. 

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