Last year, the average American spent nearly $1,000 per person on holiday gifts, up from about $885 per person in 2018.1 Though the COVID-19 pandemic continues to weigh on the retail sector (and many Americans' bank accounts), some analysts have cited reduced spending on travel, restaurants, and entertainment in predicting a slight uptick in holiday retail sales for 2020.2 But these aren't the only extra expense associated with the winter solstice. Read on to learn more about how December's short days and long nights could impact your budget.
Increased Utility Bills
In much of the country, winter means higher utility bills—not only the cost of heating, but also the added drain of holiday lights and decorations and more frequent cooking and baking. Investing in energy-efficient holiday decor and cracking open the oven after you've finished using it (thereby allowing the residual heat to heat your living space) can help reduce this impact. Many utility providers offer a free energy audit that can help identify spaces with poor insulation, gaps, or other issues that can cause your home to lose heat quickly.
And while it may seem to make sense to rely on a space heater instead of turning up the heat in the entire house, space heaters are generally only money-savers if the heat in the rest of the house is kept very low. Often, using a space heater to augment a nearly-comfortable temperature can actually cost more than simply turning up the heat a couple of degrees.3
Credit Card Debt
Many consumers may be surprised to see that their $10 bauble or stocking stuffer quickly balloons in cost to $12, $15, or even $20 or more if this charge is put on a credit card that isn't promptly repaid. With most credit cards carrying an average interest rate of nearly 15 percent—around three times the typical interest rate charged for a new car loan or home equity line of credit—a temporary bout of overspending can turn into a New Year's hangover that's tough to recover from.4, 5, 6 This holiday season, avoid the temptation to overspend by identifying budget changes you can make to free up some cash before the shopping season begins in earnest.
And if you can't avoid putting expenses on a credit card, there are two paths you can take to help with paying interest—either pay off the statement balance in full by the due date or investigate a 0 percent interest option. Many credit cards also offer cash rewards, bonuses, or discounts that can help pay for a portion of the gifts you're charging to a credit card.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.
All information is believed to be from reliable sources; however, LPL Financial makes no representation as to its completeness or accuracy.