Is America facing a “gift gap” to complement our wage gap?

Each week, Consolidated Credit searches for financial research that can help you deal with your debt and budget. This week…

The interesting study

This week’s study focuses on Consolidated Credit’s own holiday spending survey. Each year, we ask people who are working to pay off debt how they plan to spend for the holidays. As the most expensive shopping season of the year, the winter holiday shopping season places an immense burden on low and middle-class households. This year, that burden seems to be taking an even bigger toll.

Consolidated Credit polled 1,263 adults that have contacted our organization for credit card debt help. These are the results…

The big result

If you look at national surveys of the general population, Americans will spend more this year on the holidays. According to the National Retail Federation,  the average household will spend $967 this year; that’s up from $935 last year.

However, Consolidated Credit’s survey respondents overwhelmingly say that they will spend less instead of more.

In addition, over three quarters of respondents (78%) say that they plan to spend less than $500 this year.

Most – if not all – of that budget will be used on gift giving in most households:

More fascinating details

We also asked those who said they would spend less to tell us why. Most of the answers point to a lack of financial stability, from economic uncertainty to decreased income to less savings.

“Other” includes reasons from buying a home to wanting to save more money this year. Interestingly enough, those who said they would spend more didn’t cite more prosperity as the reason. In fact, one in four said their family had grown so there were more people to buy for this year. Others say they feel pressure to make their loved ones happy, and that they simply love spreading joy and good cheer.

That makes sense, given that gift giving represents the largest part of people’s budgets tend to go towards gifts. This year, almost half (48%) of our respondents said they would buy gifts for about 1-5 people. However, one in three (34%) said they needed to buy for 6-10 people.

The good news is that people may be getting smarter with the extras. Most respondents are skipping pet gifts this year and those who won’t at least plan to be frugal.

It’s also encouraging to see that only one in four Americans plan on self-gifting this year

In addition, although most indebted households still plan to donate money to charity this year, more than 90% plan to donate less than $100. When we asked the families in the same situation last year, only 35% planned to donate less than $100.

As far as other holiday expenses go, nearly two thirds (66%) of respondents will spend less than 20% of their holiday budget on entertaining.

Most people we asked are not travelling for the holidays; the majority who are say they plan to drive to save money. As a result, most will also spend less than 20% of their holiday budget on travel.

People also have learned to shop smarter, which usually involves shopping earlier. In fact, over one third of respondents say they shop year-round now, as items go on sale.

That allows many shoppers to avoid using credit to cover holiday expenses; they can use savings or cash instead. However, 42% still say they use credit cards to cover at least some holiday expenses.

That’s in line with the number of people who told us they incurred holiday debt last year. Only about 45% said they did. Out of that number, over two thirds (70%) said they’re still paying off last year’s debt.

What you can do

“Households need to budget carefully for the holiday shopping season,” says April Lewis-Parks, Consolidated Credit’s Financial Education Director. “It’s encouraging that families that have reached out to us for counseling plan to spend less than average Americans. But they need to plan carefully and stick to that budget if they want to keep that goal.”

The concern is that while families may plan to spend less than $500, that things like impulse purchasing and last-minute gift giving could jack that price tag up.

“If you plan to spend $500 and then end up spending $900, it’s very likely that the added costs will end up on credit,” Lewis-Parks explains. “In order for your holiday budget to be effective in keeping you out of debt, it must be accurate.”

Consolidated Credit offers these resources to help you stay on-budget: