Personal Finance

How to Take Control of Your Holiday Debt, According to Dave Ramsey

Ian Cooper

Published: December 29, 2024 11:45 am

Holiday spending typically puts a substantial strain on American wallets, leaving many with high levels of debt well past the season, according to finance expert Dave Ramsey.

In fact, “The average over the last several years has been that people pay their credit card debt from Christmas into May,” Ramsey told Fox Business. “So, it takes them about half the year to come back, and because they don’t plan for Christmas… it sneaks up on them like they move it or something.”

Key Points About This Article

• According to a new survey from Talker Research, the average American will spend more than $2,000 this holiday season.
• In addition, about 65% of those surveyed said they were stressed about the money they would spend. About 73% said the financial stress also cuts back on their enjoyment of the holidays.
• “The earlier you save, the less financial stress you’ll experience. Set up a separate savings account for holiday expenses and contribute to it throughout the year.”
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The finance coach also says it takes the average American about half the year to come back, “and because they don’t plan for Christmas… it sneaks up on them like they move it or something,” he added, as also quoted by Fox Business.

Also, according to a new survey from Talker Research, the average American will spend more than $2,000 this holiday season. Of the 2,000 people surveyed, 64% said they would be traveling over the holidays, spending about $846 on average. Spending on gifts, according to this group, averaged about $559 with people spending about $117 on average on their kids. Spending on parties, food, drinks, and holiday clothes adds on another $658.

In addition, about 65% of those surveyed said they were stressed about the money they would spend. About 73% said the financial stress cuts back on their enjoyment of the holidays, too. Plus, about 20% said they would not financially recover from holiday spending until May 2025. Another 17% said they will likely go into debt because of their spending, and 10% planned to spend less this year than last year.

If you fall into the camp of stressing out with spending, there are solutions.

How to Financially Prepare for the Holidays

For one, according to Casey Brueske, financial counselor and Community Education Development Specialist at PenAir Credit Union, as quoted by Newsweek.com, “The earlier you save, the less financial stress you’ll experience. Set up a separate savings account just for holiday expenses and contribute to it throughout the year. By starting early, even small amounts can accumulate and take the pressure off when the season arrives.”

Two, according to Dave Ramsey, make a list of people to shop for and note exactly how much you can spend on each person. “If you do that, and you put a name beside it, and then you total up those dollar amounts, you have what’s called a Christmas budget,” he added.

Shoppers can stay out of financial trouble by simply setting money aside ahead of the holidays. They can also avoid spending too much by budgeting, he also said.

Look to Save Money in New Year 2025, Too

Outside of the holidays, many of us want to cut back on spending to save more.

One, set a savings goal with a specific dollar amount with a set deadline.

Two, set up direct deposits to go into savings. This way, you don’t have to put a lot of effort into thinking about saving. It’s just automatically done for you. Plus, you don’t have to directly deposit 100% of your pay. Instead, start small at 5% to 10%.

Third, cancel memberships or subscriptions you don’t need. For example, I’ve been paying for membership at a gym and I’ve gone maybe five times over the last year. Fourth, stop going out to eat as frequently as you may be going.

Five, adjust your tax withholdings. If you’re getting back big refunds every year, you’ve been loaning the government your money with no interest. Instead, adjust.

Six, get rid of debt altogether or at least get a handle on it.

At the moment, the average student loan payment every month is $500, with the average borrower needing 20 years to pay it off. The average monthly credit card payment is $50 to $202 per month, with interest if you don’t pay it all off. And the average car payment is now between $100 and $644 a month.