Want to Keep From Overspending This Holiday Season? You Might Avoid Clipping Coupons, Chasing Sales and Paying with Plastic
November 14 2017 - 8:30AM
Business Wire
Findings from post-2016 holiday shopper survey
give warning to 2017 shoppers
Almost 40 percent of Americans reported overspending on the
holidays last year, and they overspent for some pretty
counterintuitive reasons, according to newly released research from
Elevate’s Center for the New Middle Class (CNMC).
“Consumers often employ strategies to save money during the
holidays that actually work against them,” said Jonathan Walker,
executive director of Elevate’s CNMC. “Those who try to save money
by looking for deals are actually much more likely to spend more
than they planned.”
The factors that lead to consumers’ over-spending fit into three
categories: poor savings strategies, poor payment strategies and
poor planning. The survey of 1,011 US consumers was conducted just
after the 2016 holiday season, when spending recollections were
still fresh.
Savings
To control holiday spending 86 percent of consumers use some
sort of savings tactic – the most popular being shopping sales, at
63 percent. Yet Walker notes: “It turns out that one of the best
ways to ensure overspending is to chase the sales.”
Consumers who said that they hunted for sales to control their
holiday spending were 45 percent more likely to report that they
overspent their budget during the holidays versus those who said
they didn’t focus on sales. If they failed to set a strict budget,
the impact was even greater. Sale shoppers who did not budget were
87 percent more likely than budgeters to report that they spent
more than they planned for the holiday.
Those who used coupons to save didn’t fare much better. Overall,
coupon clippers were 22 percent more likely than those who didn’t
use coupons to report spending more than they planned. Coupon
clippers who did not budget were 76 percent more likely than
budgeters to report that they spent more than they planned for the
holiday.
Payment
Cash is king. According to the survey, paying with cash is the
most effective way to keep from overspending. Consumers who usually
pay with credit or debit cards are 38 percent more likely to
overspend than those who use cash.
Planning
It’s normal to plan for spending on gifts, but presents are not
the whole story on holiday spending, according to the data. Gifts
amount to 58 percent of overall holiday spending, while spending on
things like travel, food and celebrations add up to 42 percent.
“Planning for all the other holiday expenses is crucial to
successfully managing the holidays,” said Walker.
The most effective way to control spending is to set strict
spending limits. Those who set limits were able to maintain their
spending. Those who failed to plan at all spent 125 percent more
than the strict planners.
The study also looked at differences between American consumers
with prime credit scores (700+) and non-prime consumers (with
credit scores below 700) and found that – contrary to what some
would believe – non-prime consumers were less likely to overspend
than their prime counterparts.
So what steps can customers take to ensure they don’t
overspend?
- Build a budget. Review all
expenses from years prior, and ensure the budget includes
categories for travel, decorations, food, and utilities. Here,
prime consumers can learn from non-prime: Prime consumers are 14
percent more likely to employ the “I have a rough idea” approach to
holiday spending – informally determining what to spend on
different categories, without clearly defining firm numbers.
Additionally, non-prime consumers are 67 percent more likely to
report that they spent less than they planned for the holiday.
- Set strict limits for spending.
For maximum impact, cap spending at a total gift budget, or per
person. Setting strict holiday spending limits more than doubles
prime consumers’ chance of improved finances after the holidays.
Non-prime also see a benefit, though it’s not as pronounced.
- If possible, account for unexpected
expenses. Fifty-six percent of respondents reported an
unexpected expense—such as car or house repair, an unexpectedly
high utility bill or medical expenses. These expenses put added
stress on budgets; respondents were twice as likely to incur new
debt if they experienced an unexpected expense during the
holidays.
- Work to avoid savings “traps.”
Though it feels counterintuitive, sales and coupons correlate to
higher spending unless consumers set and commit to a strict
budget.
- Be a cash accountant. Once the
budget is set, take out totals in cash, and leave the credit and
debit cards at home.
“Though there are slight differences in holiday spend and
strategy, for prime vs. non-prime consumers, the holidays can be
financially stressful for everyone,” said Walker. “Marketing
tactics—sales, coupons, credit card points—may look like ‘bonuses,’
but businesses know how to get consumers to spend more money. By
approaching the season with a budget and plan, consumers can
protect themselves and their financial wellbeing.”
About the Research
The Center’s research compared the responses of 1,011 Americans
with prime (n=510) and non-prime (n=501) credit scores using
interviews conducted January 12-17, 2017. For more details on the
study, click here.
About Elevate’s Center for the New Middle Class
Elevate’s Center for the New Middle Class conducts research,
engages in dialogue, and builds cooperation to generate
understanding of the behaviors, attitudes, and challenges of
America’s growing “New Middle Class,” defined as those with credit
scores below 700. For more information,
visit: http://www.newmiddleclass.org
About Elevate
Elevate (NYSE: ELVT) has originated $4.9 billion in non-prime
credit to more than 1.8 million non-prime consumers to date and has
saved its customers more than $2 billion versus the cost of payday
loans. Its responsible, tech-enabled online credit solutions
provide immediate relief to customers today and help them build a
brighter financial future. The company is committed to rewarding
borrowers’ good financial behavior with features like interest
rates that can go down over time, free financial training and free
credit monitoring. Elevate’s suite of ground-breaking credit
products includes RISE, Elastic and Sunny. For more information,
please visit http://www.elevate.com.
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