Millions of Americans carry credit card debt. For some, the joy of the holiday season will only usher in remorse, despair and a deep financial hole in the New Year.
Debt won’t stop us from spending, and even overspending this holiday season. We’ll put new debt on top of old. We’ll watch our credit card balances increase, but we won’t say no to the sales and specials that retailers thrust before us, whether in the form of prominent shopping mall displays or personalized emails in our inboxes. As a culture, we are hedonistic. We do not deny ourselves what we want. The media and other elements of our society pressure us into believing we need that gadget, that cosmetic, that procedure, that car, that pair of shoes, that brand of jacket. And even if we understand the difference between wants and needs, we buy and consume nonetheless.
Why we overspend
Overspending is easy. Although it’s true that college students are no longer bombarded by unsolicited credit card offers, it’s also true that nearly any working adult can get credit. Credit card eligibility is based on many things, including payment behavior, but it is not at all dependent on a consumer’s ability to budget or save. Furthermore, technology (like one-click purchasing) makes spending nearly effortless.
Clever marketing convinces us to buy. On the heels of a recession, retailers are eager to spur sales. Many have squeezed their profit margins to encourage cautious consumers to get off the fence. If an item’s cost is lower this year than it was last year, the “savings” can be irresistible.
We lack self-control and financial sophistication. Americans overspend at all income levels. Lack of financial management skill is the single biggest predictor of a person’s propensity to overspend, and lack of self-control is what leads to over-indebtedness. Consumes who lack self-control also make disproportionate use of quick-access credit products (including point-of-purchase store credit card offers). Financially unsophisticated consumers choose well-being now (buying something) over well-being later (not owing money, or having money to pay down debt).
As you shop this holiday season, be aware of warning signs that could signal a need for help.
- Feelings of regret or remorse after a purchase
- Feelings of shame about the amount of debt you carry
- One or more maxed out credit card
- Impulse purchases leave you unable to pay critical bills, like rent, utilities, auto loan, child support
- You spend an inordinate amount of time considering purchases
Over-indebtedness and the tendency to overspend are 100% reversible conditions. But you must take the first step.
Be aware. Track your spending. Acknowledge the facts of your financial situation.
Make a spending plan and stick to it. Be very specific. Write down what you will do with all of your money, down to the last dollar. Don’t deviate from the plan. A cash envelope system can help.
Buy less. We all want to buy gifts for our partners and children, but is it necessary to purchase holiday gifts for your parents and coworkers? Look at your list. Is it a person who already has everything he wants and needs? Is it a person who understands your limited financial resources and would not be surprised to hear that you can’t afford a gift this year? Is it someone you’re not terribly close to? Practice breaking free from a sense of obligation to spend money just for the sake of having a pretty package to hand over. Have family secret Santa exchanges so that each person only buys one gift. Bake cookies. Make cards.
Use cash. The pleasure of a credit card purchase is so far removed from the pain of paying the bill that, for many people, there is almost no relationship between the two. Put the purchase back into proper perspective by paying cash or using a debit card, so that you see the money leave your hands immediately. Create barriers to excessive online spending. Don’t store credit card information on websites and turn off one-click purchasing features.
Don’t get “What the hell” syndrome. Just because you already have credit card debt, don’t throw in the towel by allowing the balances to rise. The only way to break the cycle is to start. Don’t be discouraged by setbacks or slips. Keep getting back on the horse.
Kimberly Rotter is a writer and small-business owner. She is a featured contributor on Manilla.com and Credit Sesame and writes professionally in several industries, including finance, education, the environment, and health and wellness.
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