Holiday Debt & Regret: How to Avoid it

Daniel Rosen 00:00

Hey credit heroes, did you know that 25% of Americans regret their holiday spending? It's true. So today we're going to be talking about the dark side of holiday debt, why it causes so many credit issues, and what you can do about it. So you better stick around! 

Every year consumer spending peaks during the holiday season from mid-November until the end of December. But there's a dark secret that follows that surge of holiday spending and a massive spike in holiday debt. Now that debt doesn't just get tossed to the curb like a dried-up Christmas tree. No in most cases, that debt is going to be sticking around until February or March or much, much longer. In February this year, the financial website money geek surveyed a nationally representative sample of US adults in order to understand how much Americans spent over the holidays, how they financed that spending, and how they felt about their spending when they look back at it. And the results were unbelievable, the average person spends about $1,100. On the holidays, 71% of Americans spent $1,000 or less. 14% of Americans spent $2,000 or more. But most shocking, even though it wasn't surprising was that 41% of Americans financed 90% of their holiday spending on their credit cards. I talk about my personal opinions of credit cards all the time. I'm not a fan of credit cards, I don't use credit cards, but they're a big part of our industry, and we have to address their impact good and bad. 

When used responsibly, credit cards are a convenient tool that can build a person's credit profile and in a pinch, they can provide financial relief, but when used on items that people don't need or can't afford, and when they aren't paid off quickly, credit cards can be a fast track to financial ruin. Currently, the Federal Reserve Bank of New York estimates the average credit card holder in the US has $5,769 in credit card debt. And to make matters worse, during times of crisis, people become far more dependent on credit cards. The last two spikes of big credit card debt came during the housing crisis and during the pandemic. And if our economy continues to slip into a recession, we may be seeing another spike very soon, you might think a downward economic trend would signal that consumers are going to spend less during the holidays, but it's actually the opposite. The National Retail Federation recently predicted that the current economic downturn will not affect spending habits. In fact, holiday sales are expected to increase between six and 8%. 

Last year, the NRF president and CEO Matthew Shea even reassured his Federation of retailers that in the face of these economic challenges, they would still have a positive holiday season, because many households will supplement spending with savings and credit. Thanks, Mr. Shea. But a positive holiday season for retailers is really bad for consumers, especially if we know they're forced to draw from their savings and pile on a bunch of debt. But we shouldn't be surprised by his statement. No retailers and creditors. They encourage bad consumer behavior because they make a whole lot of money off of it as credit heroes. It's our job to protect consumers from the bad guys. And sometimes we also have to protect consumers from themselves these holiday debt statistics confirm what many of us in the credit repair industry already know Americans have an addiction to overspending. So how does this relate to us? Well, long after the holiday parties are over credit heroes are the ones cleaning up the mess of the holiday debt. So what can you do to help? Well, first off, warn everyone, tell your family your friends, your clients, and your community explain how important it is that they manage all of their holiday spendings to spend only what they can actually afford and not just put it all on their credit card because credit cards are one of the most expensive ways to borrow and studies show that the more cards a person has the more holiday spending they finance but the problem isn't just credit cards No. 

A lending tree survey revealed that 36% of all Americans took on a holiday debt. And while most consumers use credit cards to fund their spending, others used by now pay later programs Personal Loans, payday, and title loans, and even home equity loans. In other words, when people want to spend, and they're allowed to spend, they're going to find a way to spend, and the holidays, apply a whole lot of social pressure that makes people feel like they have to spend. But surprisingly, it's not the amount that people spend that is the type of financing that people use. What's most concerning to credit heroes? Know, the real sign that holiday debt is dangerous is the length of time that it takes to pay it off. That lending tree study found that 78% of consumers needed more than one month to pay off their holiday debt. 38% needed more than three months. 31% needed five months or more. And 15% didn't even list a timeline because they were only making minimum payments. And when people just pay the minimum. They're not really making a dent in the balance. 

No, people who pay the minimum are exactly who lending companies love because that's how they make their money. People who pay the minimum are basically paying lenders rent to hold on to their debt. And then the fees kick in and everything gets worse. And I know this because I was that guy. And my debt got bigger and bigger and bigger. And before I knew it, I owed over $200,000 in credit card debt. And that was a really scary place to be. I dug my way out. But it took me years and I don't want this to happen to you or to anyone else. But before I get too worked up, I want to be clear. I'm not saying we should stop enjoying the holidays. Okay, I'm not Scrooge I'm not the Grinch. The degree that holiday debt impacts each of us depends on our unique financial circumstances. We're all different. We're all unique little snowflakes. What I'm saying is, we all need to make less impulsive and better-informed choices about our holiday spending so that none of us are left with these regrets. Besides, out of the 25% of Americans who regret their holiday spending. About 6% of them say they regret not spending enough. Here's the thing to remember. 

The holidays are an emotional time that unfortunately requires clear-headed financial decision-making similar to weddings and anniversaries when signs of affection are tied to the amount of money that people spend scams, price gouging, predatory lending, and bad decisions. They're going to follow nearly 1/5 of Americans 19% say that they regret spending too much on the holidays. But overspending on the holidays like most financial problems can be easily fixed with good information, solid planning, and discipline. And it's our job as credit heroes to protect our clients during the holidays. Here's why this is important to Black Friday sales last minute gifts, baggage fees, and spiked eggnog are just a few of the reasons for overspending during the holidays. Now, not all holiday spending is bad or irresponsible. No. The holidays are when people feel most generous and charitable. They feast on travel and prioritize experiences with loved ones. Now I don't know about you, but I think those are damn good reasons to spend money. Probably the best reasons but the trick is like most good things in life is to not overdo it. Credit is dangerous because it allows people to enjoy spending money impulsively, without feeling the cost right away. But you can protect yourself from making bad holiday spending

decisions. Here's what you need to know. I'm going to give you three secrets to avoid holiday debt and holiday regret. 

And these secrets really work regardless of your circumstances. Secret number one, make a holiday plan and holiday budget. No one wants to plan fun, but there are small things you can do that are going to save you a tonne of money and prevent you from taking on holiday debt. Here are a few basic lists that will help you to build a holiday plan. Make a list of all the events that you have to attend a list of all the expected costs of attending those events, like flights Uber ugly sweaters, a list of all the people you give a gift to a list of gift ideas for each person with low, medium and high-cost options. A list of holiday items you already own, like decorations party favors serving dishes, and Hallmark Cards, and once you have those lists, you can start determining what you actually need to spend money on and where you can get creative, but assuming money will be spent. Once you know exactly where you need to spend money. You can then focus on when and how to spend money secret number two use credit wisely. The Journal of Experimental Psychology found that it's psychologically more painful for people to use cash over a credit card because they feel like they're spending money rather than spending future money. Now beyond psychology, the CFPB confirmed that consumers spend less when they pay with cash. So when it comes to avoiding debt, cash is king. But similar to Kings, paying for everything with cash is unrealistic. 

In the modern world, most people don't carry enough cash to buy big-ticket holiday items. And credit cards have big advantages over debit cards for things like airline tickets when cash is not an option. Now the trick if people absolutely have to use credit is to treat it like cash. The CFPB study suggested that people are more thoughtful about their purchases, and more connected to their purchases. When they pay cash, they spend less, and they take on less debt. So when it comes time for you to pay, be thoughtful and look to the benefits of each financing option. Look at the interest rates, the fees, and the incentives. And when you're thinking about how you use credit, you'll spend it like cash and you'll get more for your dollar secret number three, pay off holiday debt. If you pay off your holiday debt quickly. You won't have to deal with late payments, fees, penalties, lower credit scores, higher interest rates, and other domino effects or financial problems. So make a holiday plan and a holiday budget. Be thoughtful about when and how to use your credit and pay off your holiday debt as soon as possible. And if you follow these secret steps, you won't have any holiday regrets. And here's my final point. A big part of being financially responsible is knowing how much money people can afford to spend and spending the right amount. Everyone should enjoy the holidays. But do it responsibly. And that way life is better all year round. 

And now for my favorite part of the episode. Every week I feature one of our credit heroes inside our credit repair cloud Facebook community so that you can see firsthand what real people are doing as they run and grow their businesses. And today's spotlight is on Vaughn Paige Vaughn is post stood out because he said he had amazing news and I was excited to read what it was Vaughn said, What's up CRC family? So amazing news. I've been applying consistent pressure and growing my business and doing good work for months and months now riding around listening to podcasts to grow my knowledge, studying YouTube University, reading books, meditating, and boom. Now here's a major opportunity. I was requested to speak at a first-time homebuyer convention and run a credit repair workshop all in the same month. So now I need your help. Any suggestions on white label presentation PowerPoints or slides for presenting? Or should I make my own? What else should I bring? And how do to make this as successful as possible? Any suggestions? All answers are welcome. Thank you and bless up, keep changing lives. Congratulations, Vaughn. Isn't it amazing when you work hard and you learn your craft opportunity knocks on your door? That's why I say we make our own luck because we have the power to put ourselves in a position to find these amazing opportunities. Now as far as suggestions about presentations, first, there are some PowerPoint presentations in the file section of our credit repair cloud Facebook community. If you click on Files, you're going to find them. Also, I'm a huge believer in rehearsing. If you saw the speech that I recently gave at Funnel Hacking live, you should know that I spent a lot of time writing, rewriting, and rehearsing that speech. Now I do have a lot of experience in show business. But I still need all that preparation time before I go up on stage. 

So choose the slides that help you to tell your story. Be yourself and sell your services and keep it well-paced. And if possible, practice once or twice with someone that you trust to give you feedback. That's what I do. And believe me, This all helps. But you're going to do an amazing job for fun. And I can't wait for you to tell us how it goes. And I'll end by saying if you don't already have a credit repair Cloud account. Check it out. It's software that most credit repair businesses in America run on. Just sign up for a 30-day free trial at credit repair cloud.com/free trial. And if you'd like to change lives and grow your very own credit repair business, check out our credit hero challenge. It's a live experience that it's helped tonnes of credit heroes to get certified in disputing and to gain confidence as they run their credit repair business on a solid foundation so they can change a whole lot of lives and make a great living in the process. We're starting the next challenge very soon. So you want to join before the doors close, or you're gonna have a long wait until the next one. So sign up right now at credit hero challenge.com. And if you're finding value in the things that I share on this podcast, click below to subscribe and follow and give me a five-star review or share the show and help me to change more lives. And if you'd like to read the show notes, they're posted on my blog, and if you have a question or a comment, drop it down below because I read each and every one of them. I would love to hear from you and I'll respond as soon as I can. So take care credit hero and remember, when you avoid holiday debt, you will avoid holiday regrets. Keep changing lives.