A good friend recently suggested I write an article on how to get back on track financially after the holidays. I responded, “Wow! That’s a great idea. I never thought of that.” Dumbfounded, my friend said, “All the financial writers are covering Christmas blues and holiday hangovers. I can’t believe you haven’t written about it.”
As I began brainstorming how to help people bounce back financially after overspending during the holidays, I thought to myself, I help people get back on track and ahead financially every day—why would my advice be any different because it’s the holidays?
The Christmas Spending Trap
Every year, millions of people end up broke after Christmas. We all know Christmas falls on December 25 every year, yet many act as if it snuck up on them. Do people really believe time will stand still until they decide to plan for the holidays? Or do they rely on unrealistic hopes like winning the lottery, getting a surprised windfall, or some “Santa Claus” figure to save the day?
Being broke after Christmas is just a symptom of a larger issue. It’s a microcosm of things to come—unexpected expenses, emergencies, home maintenance, college costs, health care, and retirement. If you’re broke after Christmas, you’re likely going to be broke after retirement. I said what I said!
Holiday Spending by the Numbers
Let’s put holiday spending into perspective. According to the National Retail Federation (2024), the average household spends $875 during the holiday season. While that figure may vary depending on income levels, a significant portion of this spending is done on credit cards. A recent LendingTree survey (2023) found that 35 percent of Americans who use credit cards for holiday shopping still carry balances the following year. This means those holiday gifts are accruing interest long after the season has passed.
Let’s break it down: If you put $875 on a credit card with an average interest rate of 20 percent and only make the minimum payments, it could take over five years to pay off that balance—and you’d pay nearly $600 in interest. Is that new gadget or holiday feast worth it?
Is $875 such a large amount that you can’t save for it or pay cash? If you find yourself singing the Christmas blues over this amount, it’s a sign of deeper financial problems. And the truth is, much larger financial challenges lie ahead.
Bigger Expenses Are Coming
If $875 is enough to derail your finances, consider the much larger expenses that life will inevitably throw your way:
Emergencies
According to Bankrate’s 2024 survey, only 43 percent of Americans can cover a $1,000 emergency with savings. This means a car repair, medical bill, or other unexpected event could push more than half of Americans into debt. This is why financial experts recommend building an emergency fund with three to six months of living expenses. Start small—saving even $500 can help prevent financial disasters.
College Costs
The average annual cost of college tuition and fees is $10,940 for in-state public schools and $40,550 for private schools (College Board, 2024). These figures don’t even include room and board, books or other expenses. If you’re a parent, failing to plan for these costs could saddle your child—and yourself—with decades of student loan debt. Establishing a college savings fund, like a 529 Plan, can make a significant difference.
Homeownership
Owning a home is often seen as a financial milestone, but it comes with hidden costs. Home maintenance alone can cost 1–4 percent of your home’s value annually (Zillow, 2024). On a $250,000 home, that’s $2,500–$10,000 per year. Before jumping into homeownership, focus on paying down debt, building savings, and ensuring your financial house is in order.
Retirement
The cost of retirement is perhaps the most daunting. The U.S. Department of Labor reports that fewer than 50 percent of Americans know how much they need to save for retirement. Alarmingly, 21 percent of Americans have no retirement savings at all (Federal Reserve, 2023). Social Security typically replaces only 40 percent of pre-retirement income, and traditional pensions are becoming rare. If you want to maintain your lifestyle in retirement, experts recommend saving at least 10–15 percent of your income starting in your 20s or 30s.
The Root Causes of Financial Struggles
If you’re living paycheck to paycheck, robbing Peter to pay Paul, or struggling to make ends meet, the root causes often boil down to four issues:
Overspending: Living beyond your means and prioritizing wants over needs.
Undersaving: Failing to save for emergencies, retirement, or other goals.
Poor Money Management: A lack of budgeting, tracking, and planning.
No Financial Game Plan: Operating without clear goals or strategies.
Addressing these issues requires both mindset shifts and practical action. Start by creating a budget, cutting unnecessary expenses, and automating savings for emergencies and long-term goals.
Practical Steps to Avoid Holiday Debt
Plan Ahead: Start saving for the holidays in January. Setting aside just $75 a month will give you $900 by December.
Create a Holiday Budget: Decide how much you’ll spend on gifts, food, and decorations, and stick to it.
Use Cash or Debit Cards: Avoid using credit cards. If you pay the minimum payment, with interest you end up paying nearly two times the amount of the gift.
Shop Smart: Take advantage of sales and discounts to stretch your dollars.
Give Thoughtful, Not Expensive, Gifts: Homemade or personalized gifts often mean more than costly items.
The Bigger Picture
The holiday season often shines a spotlight on financial habits. It shows if you’ve been naughty or nice in regards to managing your money. If you find yourself in a cycle of overspending and undersaving, use this as a wake-up call. Start small—build an emergency fund, save consistently, and educate yourself about personal finance. The habits you form today will determine your financial future.
A New Year, A New You
The beginning of a new year is the perfect time to take control of your finances. If you need personalized help to create a financial plan, I’m here to serve. Be sure to follow me on Facebook where I share daily smart money moves. Also subscribe to my YouTube Channel where I produce videos delving into financial topics.
Let’s make 2025 the year you break free from financial stress and build the life you deserve.
(Damon Carr, Money Coach can be reached at 412-216-1013 or visit his website at www.damonmoneycoach.com)