The Best Holiday Gift Is a Blessing to Stay Out of Debt

The Three Wise Men really started a trend when they brought gold, myrrh, and frankincense to that manger in Bethlehem all those generations ago. 

Americans are expected to spend $682 billion on Christmas gifts this year. Much of that spending will be financed by revolving credit card debt, even though millions of people are still paying off credit card debt from last year’s holiday spending:

  • 24% of millennials still haven't paid off last year’s holiday credit card debt.
  • 16% of Gen-Xers haven't paid off last year’s holiday debt.
  • 8% of boomers haven't paid off last year’s debt. 

Americans in their 30s, 40s, and 50s are overwhelmed with an average $8,000 – $9,000 in credit card debt. This includes millions of people with top incomes and great credit scores.

Our Innate Desire to Give Has Been Turned Against Us

Winter holiday gift giving predates the first Christmas. Likewise, people have always been inclined to go into debt to finance presents of love and appreciation. However, our innate human desire to give gifts to those we love has been turned against us. 

A huge variety of social triggers and expectations encourage people to overspend during the holidays. About 40% of shoppers overspent on holiday gifts last year.

Greater Spending on Gifts Doesn’t Equal Greater Happiness For Either Party

Americans leave the winter holidays with tremendous credit card debt. Yet there’s no evidence that lavish spending makes us happier - indeed, data indicates the opposite. As noted in Time Magazine:

Psychological research indicates being generous makes us happier, but to the extent gift-buying causes stress, it decreases your happiness. Your stress and unhappiness affects the people in your life, especially those who love you most.

The Best Strategy for Avoiding Holiday Debt

A number of tactics can help people enjoy the holidays without taking on stressful debt. For example, certain budgeting systems set guidelines for giving. Mindset hacks (such as the 5 Whys) can also provide clarity on giving and spending. 

However, budgets and hacks can fail, especially under the pressure of Christmas. 

The best strategy for avoiding holiday debt is to make an overt, intentional spending pact with your friends and family. 

Be direct. Tell loved ones you only want them to spend a set amount on you this year - perhaps $25 or $50. Likewise, let them know you’re spending a set amount on them.

It may feel cheap or pushy to do this. But most people will welcome the guidance. It sets helpful expectations. It emphasizes creativity and knowledge of the other person. You'll set a forward example. And science shows that making commitments public is one of the most effective ways to make them stick.  

But best of all, making a spending pact is generous in the fullest sense. After all, you're not just staying out of debt, you're helping your loved ones stay out of debt. And that is a profoundly beautiful gift with endless returns.