This holiday season, Americans are poised to allocate more money than ever before, surpassing pre-pandemic levels, according to projections from the National Retail Federation (NRF). Anticipated holiday spending in 2023 is expected to witness a growth of 3% to 4% over 2022 volumes, reaching a substantial range between $957.3 billion and $966.6 billion.
A recent Bank of America survey indicates that 80% of Americans are prepared to spend up to $1,000 during the holidays. While 43% plan to spend less this year, 57% aim to maintain or increase their expenditures. Millennials stand out, being three times more likely to have a significant spending surge compared to other generations.
Despite the anticipation of robust holiday spending, a significant 70% of respondents express their intention not to take on any debt for holiday gift purchases. For those considering borrowing, suggestions include exploring 0% APR credit cards or personal loans for larger expenses.
Concerns arise as a D.A. Davidson & Co. survey reveals that a substantial portion of Americans, 71%, are worried about financing their 2023 holiday celebrations. Approximately 40% admit to having a higher credit card balance compared to last year, and 54% do not consistently pay off their credit card balances in full each month. The Federal Reserve Bank of New York reports that Americans collectively owe $1.08 trillion on their credit cards after accumulating $48 billion in new spending during the third quarter of 2023.
D.A. Davidson Vice Chairman of Wealth Management, Andrew Crowell, acknowledges the growing unease among Americans, stating, “As credit card balances grow during this period of sustained inflation, many Americans are understandably worried about their financial picture, especially as we approach a period of increased spending.”
To navigate this potential financial strain, experts recommend budgeting as a key tool. The D.A. Davidson survey highlights that one-third of Americans have already budgeted for holiday spending, and an additional 36% plan to create a spending plan. Experts also encourage open communication about holiday plans among loved ones, with 64% of respondents intending to discuss holiday spending with their significant other.
For those seeking guidance, financial advisors are positioned as valuable resources. Kelly Jones, Financial Advisor at Thrivent, suggests, “They can look at your overall financial picture and help you develop a budget that makes sense for your situation. Personalized advice can help you navigate holiday expenses, ensuring your spending doesn’t derail your short- and long-term financial goals.”
Furthermore, consumers are advised to leverage free mobile apps, digital tools, and online resources to track spending. Understanding spending patterns can contribute to the creation of a sensible holiday budget.
As Americans gear up for a potentially record-breaking holiday spending spree, the emphasis on responsible financial planning and the prudent use of credit becomes paramount. The evolving economic landscape underscores the importance of informed decision-making to ensure a festive season that is both enjoyable and financially sustainable.
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