DAVE SWANN / DSWANN@STARBULLETIN.COM Fight the trend
toward holiday debtAmericans are planning to increase
their holiday spending by 15.7%
percent this year to $835
from $722 in 2002
Tita Murakami, a self-employed Pearl City mother of five, used to get herself in debt buying holiday gifts, but corporate downsizing forced her to re-evaluate her priorities and take a more dollars-and-sense approach to the season.
"I used to run up the credit cards. In fact, I worked all year trying to beat the Joneses," Murakami said. "It's an easy trap to get into, but I don't ever want to be in that rat race again."
Murakami has long left her marathon shopping days behind, but she's the exception rather than the rule. Americans are planning to increase their holiday spending by 15.6 percent this year. The average holiday shopper will spend $835 this year, up from $722 in 2002, according to Myvesta, a financial health center.
And many holiday shoppers will spend that money whether or not they have it in the bank, said Jim Tharp, of Aloha Credit Counseling, a Honolulu-based nonprofit credit counseling center.
RONEN ZILBERMAN / RZILBERMAN@STARBULLETIN.COM
Tita Murakami, center, and her children, from left, Toni, 11, Ezra, 3, and Zechariah, 8, gather around the piano in Pearl City. Murakami and her children found creative ways to downsize their Christmas spending by singing and dancing as gifts for friends.
"Holiday debt seems to always form a large part of anybody's credit card debt," he said. "There is such a tendency to overspend out of love and affection during the holidays -- it's a time when your heart gets the better of your mind."
Tharp estimates as much as 25 percent of the debtload carried by his clients stems from excess holiday spending.
"We've developed a tradition of debt, we've been saving less and spending more," Tharp said. "And, we often allow ourselves to overspend because it's Christmas."
Oahu's credit counselors often see a jump in client loads after the holidays, said Wendy Burkholder, a debt counselor at the nonprofit Consumer Credit Counseling Service of Hawaii.
"Very often clients will come to us and say I spent $1,500 to $2,000 at Christmas," Burkholder said. "What they don't realize is that by spending beyond their means every holiday, they are perpetuating a legacy of overspending. They are also leaving the next generation with unrealistic expectations because they've always had this spree."
During the holidays, plenty of mainland and Hawaii consumers significantly up the amount of goods they buy on credit. This year, in the shopping days between Thanksgiving and Christmas, U.S. consumers will use their major credit cards more than 1.7 million times an hour, and the average U.S. household will rack up more than $1,000 in credit, according to Cardweb.com.
The key to reducing the debt load during the holidays is to start planning and saving for next year right now, said Steve Rhode, president and co-founder of Myvesta.
"Even though many people say they will pay off their holiday debt in a few months, in reality, it usually takes six months to a year for holiday gifts to be paid off. By that time, you're right back where you started with another holiday season right around the corner," Rhode said.
After setting a realistic holiday budget, consumers often find it takes creativity to pull it off, said Suzanne Olson, editor of ihatefinancialplanning.com.
"People need to try to live rich no matter how wealthy they are," Olson said. "This holiday season, instead of overspending, why not be creative and allow yourself to be open to the holiday surprise of not overspending."
Murakami recommends giving gifts from the heart. When she decided to stop the cycle of huge holiday spending, Murakami said she and her family brainstormed to come up with low-cost gifts that were high on thoughtfulness.
One of her family's favorite traditions has become offering a gift of song or dance to friends. They often spend time writing personalized cards or blessings, rather than picking out just the right store-bought gift.
"After awhile, you realize that you can't spend money you don't have," she said. "It's ridiculous to splurge and than worry yourself sick about how to pay for it."
For those who aren't as creative as Murakami, giving gift certificates is another gift-giving option, Olson said.
People always appreciate receiving offers to clean the house, baby-sit, wash a car or cook a meal, she said.
Buying items in bulk and dividing them to make inexpensive gift baskets is also a holiday money-saver, said Naomi Johnson, a Pearl City stay-at-home mom and college student.
She buys the tower of chocolates at Sam's Club for $21 and divides it into five or more gifts.
"I put smaller boxes in gift baskets and I use the bigger boxes for individual gifts,"she said.
When Murakami has to buy a gift, she limits herself to purchasing small trinkets or making consumables for friends outside the immediate family. She also cuts down on the number of gifts she exchanges with family members by agreeing to draw names and purchase gifts for a select few.
"We have fun playing Secret Santa," she said.
For those who can't keep up with the Joneses and are feeling guilty, Murakami said it's important to let it go.
"It's important that people remember to receive also is a blessing as well as to give," she said.
Consumers often try to rationalize debt and expensive purchases because they want the holidays to be a time when they can ignore their daily strife, but it's much healthier to live within their means, Olson said.
We want to use instant gratification to meet our needs, but the holidays are already stressful enough without adding financial debt to the situation, she said. "That only exacerbates the holiday hangover."
Retailers are predicting the fattest holiday shopping season in years, according to the National Retail Federation, which projects holiday sales will increase 5.7 percent this year to $217.4 billion, the largest increase since 1999.
That's good news for the economy, but it does not always translate into good news for individual households, Rhode said.
Holiday spending could significantly up the average credit card debt carried by U.S. consumers to about $4,000, he said. Last year, credit card debt rose 35 percent to $3,250 from $2,411 a year ago, according to Myvesta.
"Individuals and families are still struggling with high debts due to job losses, unexpected events and overspending," Rhode said. "It's important for them and everyone to plan ahead so that the fun of holiday shopping doesn't create the January blues from high credit card bills. Having a plan and sticking with it can save hundreds of dollars, and give people a much less stressful holiday season."
According to a survey by Myvesta, almost half of people with problem debt can be classified as depressed. Of those just under 40 percent reported symptoms of severe depression. In comparison, studies have shown that 9.5 percent of the general population is clinically depressed.
"The emotional aspect of money is huge," Rhode said. "Our feelings and desires, rather than our cash flow, often control how we spend. When someone gets into trouble it's the emotional triggers that can cause the most financial damage, and that is something that simple number crunching or payment plans cannot fix."
But that doesn't mean consumers who have already accrued debts this season should wait until they are making New Year's resolutions to try fixing them, Olson said.
"There's still time but people need to start saving now," she said. "The biggest step consumers need to take is to avoid procrastinating. People read this and say, 'oh yeah, sure, whatever.' But in reality, they really need to make a decision to overcome that tendency. It's no fun to plan ahead or be disciplined but the consequences are much easier to live with."
Johnson, who finished her holiday shopping six weeks ago, said planning ahead works. By setting a budget early, she's able to take advantage of sales. She buys ahead and stores the items in plastic containers until needed.
"I always start shopping right after Christmas," she said.
Those who didn't plan ahead and find themselves dealing with the consequences of overspending, should consider getting a part-time job to pay off the bills or making a New Year's resolution to set a budget, Olson said.
They could also save money by making small budget cuts, such as foregoing pricey coffee drinks, she said.
"It may seem like its too late, but its never too late, because holidays are cyclical and there's always another one next year," Olson said. "The more upfront planning, the better a consumer's chance to resist the urge to overspend because of guilt."
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Holiday shopping tips
Myvesta, a financial fitness center, offers this advice:1. Carry only two cards when shopping. Use one with a zero balance for purchases you will pay off in full. Use the other, low-interest-rate card for purchases you will pay off over three to six months.
2. Record all of your purchases in your checkbook register. Even if you don't write a check, subtract the amount of the purchase. That way, when the bill arrives, the money will be in your checking account to pay the bill in full.
3. Avoid taking advantage of "skip payment" offers that could ultimately cause you to pay more interest and face larger bills.
4. Avoid "buy now and pay later" offers, which encourage you to spend money you don't have.
5. Use a low-rate, major credit card instead of high-rate department store cards.
6. Don't apply for department store cards just to get a one-time discount.
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