Consumers Tend to Overspend During Holiday Season, Behavioral Finance Expert Warns

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Personal Finance Nouvelles

Holiday Spending,Emergency Funds,Financial Goals

A behavioral finance expert highlights that consumers are wired to prioritize short-term spending over long-term financial goals, particularly during the holiday season. Americans are expected to spend an average of $1,014 on holiday gifts in 2024, up from $923 last year. Nearly 10% of consumers plan to use their emergency funds, while 9% will prioritize gifts over household bills and debt payments.

Consumers are"wired" to think more of the short term instead of long-term financial goals, according to a behavioral finance expert.There are ways to check your spending during the holiday season, experts said.

"For 99% of our time on earth, thinking about the long-term future hasn't served us very well," said Klontz, who is a member of CNBC'sThe short-term gratification of giving gifts to loved ones can eclipse the long-term focus that's needed to be good with money, Klontz said. That's where many people fall short, he said.

Additionally, consumers may feel the social pressure to spend more than they might like because they don't want to appear"cheap," said Andrea Woroch, a consumer finance expert.Develop a spending plan now around how much to allocate to the holiday season, Klontz said. It's not too late, even over Black Friday weekend. Consumers can use a gift list tracking app like Santa's Bag to track purchases and actual spend, Woroch said.

Set gift expectations with family and friends now, Woroch said. This may mean focusing on kids only or setting up a"Secret Santa" exchange so you're only responsible for one gift rather than many, she said. Instead of a physical gift, perhaps find an activity to do together instead. Or, set a gift budget, suggesting a lower amount this year, Woroch said.

 

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