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Friday, June 14, 2024

A College Student’s Guide to Avoiding Holiday Debt


College student shopping for the holidays

College student shopping for the holidays

The old saying “the more the merrier” doesn’t have to mean spending more money and going into debt. The holidays can easily put a dent into your budget, but with some smart choices, you can get through them without breaking the bank. Our Money Matters has some practical tips to help college students enjoy the season without waking up with a debt “hangover” in January.

1. Create a budget, and don’t ignore it.

It’s really easy to get carried away with buying presents for friends and family if you don’t have a plan. Decide how much you can reasonably spend per person and then stick to that. To help you with the process, check out Our Money Matters budgeting tool. This year, Americans are expected to spend about $1,455 each, according to a study by Deloitte, but that doesn’t mean you have to. Remember, it’s the thought that counts, and your loved ones will understand that you’re in college and don’t have unlimited funds.

2. Make a list and check it twice.

One of the most effective ways to avoid overspending during the holidays is to create a list of gift recipients and the gifts you plan to buy. According to a National Retail Federation survey, people who make a shopping list are more likely to stick to their budgets and avoid impulse purchases.

3. Utilize student discounts.

Many retailers and online stores offer student discounts and exclusive deals during the holiday season. Use your student status to your advantage. Research these discounts, sign up for student loyalty programs, and keep an eye out for special promotions that cater to students.

Shopping smart means looking for the best deals and discounts available. According to the Deloitte 2020 holiday retail survey, 61% of consumers planned to do most of their holiday shopping online. Use price comparison tools and coupon apps to find the best deals.

Instead of putting your charges on a credit card, stick to using a debit card. By using a debit card, you will avoid starting 2024 in debt. Studies show a correlation between the use of credit cards and increased spending. According to a survey from LendingTree, 35% of Americans took on holiday debt in 2022 — about the same percentage as last year (36%). But the average debt jumped to $1,549, up 24% from last year’s $1,249. Don’t fall into that trap.

For college students, crafting personalized gifts or creating heartfelt DIY presents can be a great way to save money while showing your loved ones that you care. Handmade gifts often have more sentimental value than store-bought items. Consider making an online or offline scrapbook of memorable moments, recording a playlist of favorite tunes, creating handmade ornaments or candles, or shopping at small craft fairs. Even better: offer your time for babysitting or cooking dinner one night. Your sister, who has a full-time job and two children, will definitely find that more meaningful than another sweater!

7. Consider a Secret Santa exchange.

One way to reduce the financial burden of gift-giving, especially if you have a large family or social circle, is to organize a Secret Santa exchange and limit the cost of the gift. This way, everyone only needs to buy one thoughtful present, and everyone can enjoy the festive spirit without overspending.

8. Cut back on discretionary spending.

You can use that extra cash for gifts if you cut back on a few things leading up to the holidays. Consider the “latte factor” or the notion that if we added up the cost of our daily lattes and saved or invested it, we could build up wealth significantly faster. So, skip the designer coffees for a month, take public transportation rather than spending money on gas, and avoid those late-night shopping binges. Instead of bar hopping on a Saturday night, go holiday caroling or grab some friends to see a Christmas tree lighting. Those outings will be fun, and they won’t break the bank.

Over recent years, one of the most significant holiday trends is the increase in “self-gifting”—or treating yourself to presents when you’re out shopping for others. In fact, according to the National Retail Federation, nearly 60% of people are now buying themselves a “little something” while they are supposed to be shopping for their loved ones. And retailers are good at capitalizing on that to make you part with more dollars. For example, “If you spend x more, you get free shipping.” The problem is that you have almost doubled your expenditure and only saved $12.00 on shipping!

It’s easy to get carried away for the holidays and overspend. The average person spends way more during the holiday season than any other. For context, shoppers spent $600 billion during the holidays last year. The next highest seasonal total was the “Back to School” shopping season at $72 billion. In other words, on average, Americans spend nine times the amount of money retail shopping during the Christmas season than any other season of the year. Unfortunately, that joy of giving turns to dread in January when you have to face the debt you’ve acquired. But you can control your destiny by putting the brakes on spending. Do yourself a favor and think about the true meaning of the holidays. Enjoying stress-free time with your loved ones is something everyone will remember way more than another scarf!

For more tips on how to improve your financial future, sign up for free at Our Money Matters.

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