(844) 845-4219 » Dvorkin on Debt » Holiday Debt Hangover: The Fear And Regret Begin

Holiday Debt Hangover: The Fear And Regret Begin



Sadly, Hanukkah and Christmas are over.  While we’re still officially in the holiday season until New Year’s Day, you’ll notice the seasonal smiles will slowly start being replaced by somber faces.

What has changed? I call it the annual Holiday Debt Hangover.

Like all hangovers, this one starts long before you start feeling bad, and it’s preceded by feeling really good. Who doesn’t like buying and receiving gifts? Then again, who enjoys paying that massive mid-January credit card bill?

In November, a mortgage company polled 1,115 Americans and asked them what was stressing them out about this holiday season. The top answer: one-third said they “at least somewhat wished they could skip the holiday season rather than spend money on gifts.”

Other sickly results…

  •  More than half (52 percent) didn’t set a gift-giving budget — or did so and couldn’t stick to it.
  • Almost a third (32 percent) bought all their gifts on credit cards — a 3 percent got personal loans while 2 percent took out equity in their homes. (I’m sure this horrified the mortgage company conducting the poll, even as it looks like a new marketing opportunity.)
  • 21 percent of Americans “who incurred credit card debt last holiday season took six months or longer to pay it off.”

That last number is the most disturbing to me. If one-fifth of Americans need six months to pay off their holiday debts, that’s one heck of a hangover.

I’ve often wondered how big can that hangover get. When will a majority of Americans still be paying off the previous year’s holiday gifts even as they shop for this year’s?

Last December, I wrote about a similar holiday poll, this one conducted by Experian. It showed something similar to what I’ve just written. First, “43 percent of Americans feel pressure to spend more than they can afford during the holiday season.”

Second, “Failure to develop a budget (62 percent of survey respondents) is the main detractor from holiday enjoyment.”

That means nearly half this country feels financial stress over holiday gift-giving, but most of its citizens still refuse to set a budget.

I’ve also written previously about how debt is a psychological problem as much as a financial one. Around the holidays, the psychology is as intoxicating as a gallon of eggnog.

After two decades as a financial counselor, I know the worst is yet to come. Specifically, the Holiday Hangover’s true depths won’t register until the week of January 15.

That’s when most Americans will open their mailboxes — online or at their home — to find their December credit card statement. If past is prologue, the amount will be much higher than these folks thought, and in many cases, much more than they can afford.

That’s why the end of January is the busy season for credit counselors. Right now, business is slow for credit counseling agencies. In a few weeks, their phones will ring off the hook. Why? Because these agencies offer not only advice but powerful tools like debt management programs.

If you’re experiencing the early symptoms of Holiday Debt Hangover, my advice is: Don’t expect it to get better on its own, and take your medicine right away. Contact a reputable credit counseling agency. If you don’t do it through, then do it somewhere — and soon.

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