Moderation is hard in the season of excess spending and ardent adult peer pressure to participate in consumer orgies, but I’d like to offer a few words of precaution. Some might call it sanity.
“This is the most dangerous time for people financially,” Karen Carlson of debt.org explained. “I think a lot of people lose sight of their budgets, you know, just like their diets.”
Warning: Carlson is a kill-joy. She said her friends do not invite her shopping because she will not enthusiastically exclaim, “Get it. You deserve it. It’s such a great deal.”
She will most likely tell you that you mysteriously didn’t need it before you saw it gleaming in the spotlight with a big, shiny sale tag on it and you don’t need it now.
I’m sure this doesn’t apply to you personally, but it’s common to hear people say that they’ll just let madness and gluttony ensue and then they’ll get back on track in January.
OK, maybe it is you.
Debt hangover
The problem is that most of us know deep down in our guts that getting back on track could take years of careful planning and discipline, not a few weeks. For households that have any credit card debt, the average is $15,500, according to the Federal Reserve stats gathered by nerdwallet.com. And about half have more debt than savings, according to Bankrate.com.
So the holiday fiscal hangover kicks in around January and much like gym memberships skyrocket, financial counselors are in high demand.
“A lot of people have this mentality that ‘I make what I make and I spend what I spend. There’s nothing I can do about it,’” said Thomas Nitzsche of ClearPoint Credit Counseling Solutions. But obviously, there’s a little thing called free will, which is an interesting thing to discuss with a guy named Nitzsche. He would have had an interesting existential debate with another somewhat famous Nietzsche, but that’s another story.
“We try to empower people to think differently,” Nitzsche said. We are not helpless when the siren call of mass consumer spending intones. Although reports estimate that more than 95 million people will shop Black Friday. Yet, we can decide to do what’s in our own best interest even in the face of doorbuster deals.
The best time to act is before that $600 splurge on sale items ends up costing you 20 percent or more in interest.
An article in Psychology Today under the headline “Can’t Buy Happiness” explained, “Credit cards get rid of restraints, both of actual money and our psychological discomfort of spending it. When we handle cash, we physically part with it, and our awareness of spending money increases.”
Meaning, credit can literally make you irrational.
“A big problem is people seeing some great, wonderful deal, but it’s not for an item on their list or in their budget, but it’s such a great deal that they buy three,” Carlson said.
They reason (though that’s arguably the wrong word) that someone is going to love this toaster/blender/coffee maker/gadget and “I’m going to be sorry, I didn’t buy more.”
“Then it ends up in next year’s garage sale,” Carlson said.
Everybody’s doing it
According to the National Retail Federation’s Thanksgiving Weekend Expectations survey conducted by Prosper Insights & Analytics, six out of 10 people say they will likely shop this coming Black Friday, Small Business Saturday, Shop Good Sunday or Cyber Monday. That’s a total of more than 140 million shoppers. That’s about the same as last year’s estimate.
Other surveys suggest most people have already started shopping for the holiday. Still it’s not too late to exercise restraint. It’s never too late.
“I’m not going to tell people not to shop Black Friday,” Carlson said. “Money is very personal and no one wants their kids to be empty-handed for the holiday.”
But she and other financial experts say you shouldn’t just forget caution altogether. And by the way, the doctor would say the same about your caloric intake, but that’s not what we’re here for.
Both Carlson and Nitzsche suggest you buy what you must but be mindful of the consequences. Look at your budget. Look at your spending. Look at your credit account. Do not go blindly into binge consumption.
Carlson suggested meditating on a purchase when you feel frenzied. Then we had a good laugh. Have you seen video of Black Friday shoppers, I asked.
Plan to shop or shop to fail
Nitzsche said that it’s a good idea to think of ways to cut back now, before you buy anything else. Can you cut your cable bill, lunch spending, $7 latte habit?
Look at what you owe and figure out how much you’ll have to pay on installments to eliminate that debt. If you can transfer costs to lower interest credit cards or loans, consider that, but make a plan to pay it off and don’t forget to start saving for next year. You can break the cycle.
The National Retail Federation estimates the average person will spend $804 during this holiday season. That’s up nearly five percent from last year’s $767. If you started saving year-round that would be $15 a week - one less dinner out, two fewer coffee drinks … in other words, a little restraint.
Yes, there is a strong, strong urge to slide your credit card and stick your head in the sand, Nitzsche said, describing the habits of countless clients who wander into their credit counseling offices in January when the first wave of holiday spending bills roll in. He said some walk in with bags of unopened statements, because they simply can’t bear to look at them.
The other Nietzsche would probably have something to say about the complex nature of humans being both free and unfree, but we’ll put it another way: You can run from debt, but you can’t hide. Spend responsibly.
