ALBANY, Ga. (WALB) — A new report finds that about 30% of Americans are cutting back on spending, while rising prices are prompting many shoppers to rethink how they buy gifts.

WALB News 10’s Quinlan Parker talked with a certified financial educator about how to avoid taking on unnecessary debt and make a holiday budget that works.

Americans report tighter finances

It’s been a tough year for Americans. The report found 35% of Americans say their household finances are worse than they were a year ago. Inflation and rising prices are the main culprits.

The report found 51% of Americans say inflation is their top source of financial anxiety heading into year-end.

The average American plans to spend $818 this holiday season, according to the report, with 26% expecting to spend $1,000 or more.

The report also found 77% of Americans say they will alter their gift-buying strategy this year in response to rising prices. Of those, 46% plan to buy fewer items, 40% plan to opt for cheaper items, and 26% plan to trim their recipient list.

However, the report found some non-negotiables. For instance, 46% of people say they will still buy gifts for their children, whether or not it breaks their budget.

The financial educator said the survey does not specifically show that intentional spending is the reason people are cutting back, but said becoming more intentional with spending is a good way to save money during the holidays.

“I will say being more intentional with holiday spending is a great way to celebrate within your means,” the financial educator said. “Making and sticking to a holiday budget is your best bet.”

Ways to cut down on holiday costs

The financial educator described several ways to reduce holiday spending.

“For instance, like in recent years, I have a friend group that we’ve kind of moved to a Secret Santa gift exchange instead of doing like gifts from each of us to each of us,” the financial educator said. “That’s been money saving.”

“In addition to that, with my brother and sister-in-law, we opt for a dinner in and to spend quality time with each other instead of giving gifts,” the financial educator said. “I’m also big on secondhand gifts from thrift, resale, or antique stores. And like, let’s face it, not everyone needs a material gift.”

“It’s totally okay to have conversations with friends and say, hey, can we skip gifts this year and just spend some quality time together,” the financial educator said. “They very well may be relieved to get that question.”

The financial educator also pointed to free holiday activities, including parades and light displays, as a way to save money and make memories.

Buy Now, Pay Later use raises concerns

The report found 33% of Americans are currently enrolled in at least one Buy Now, Pay Later program.

“So with buy now, pay later plans, the biggest risk is like overextending yourself,” the financial educator said. “When you agree to a bunch of BNPL purchases, they can be really hard to keep track of. So you’re more likely to overdraft when those due dates come.”

“And the truth is, buy now, pay later plans encourage you to overspend,” the financial educator said. “You’ll see a plan broken up into four installments over two months, and you think, oh, it’s just a small payment. And those add up really quickly, especially during the holidays.”

Emergency savings at risk

“So as for emergency savings, buying gifts for the holidays using your emergency fund could mean that you won’t have funds to cover actual emergencies, like home or car repairs when you need it,” the financial educator said.

Still, 14% of survey respondents say they dip into their emergency funds to cover holiday purchases.

“Instead of relying on emergency funds, we recommend making and sticking to a holiday budget. That’s the number one tip,” the financial educator said.

The financial educator also suggested creating a holiday sinking fund, a savings account or fund specifically for the holidays.

“So for instance, if you started today, or if you started this month in October, putting, you know, $20 a week into this, toward the end of December, you would have a decent amount saved,” the financial educator said.

The financial educator said people could also look for a side gig, noting many places are hiring for the holidays, or use a 0% APR credit card.

“Now those offer promotional periods where you’re not charged interest,” the financial educator said. “But the key to that last tip is making sure that you’re paid up before the interest starts coming in. We would never recommend people taking on more high-interest debt to cover their holiday spending.”

Carrying over holiday debt

The report found 17% of Americans say they are still carrying debt from last holiday season. It also found 53% say they are currently carrying credit card debt at all, with 22% describing that debt as significant.

“So there’s a significant risk of piling on to existing debt and getting further into a debt cycle,” the financial educator said. “That can bring on a lot of anxiety too.”

The financial educator said a separate survey conducted this year on financial anxiety found 23% of Americans said credit card debt was their biggest stressor.

The financial educator recommended sticking to a holiday budget or creating a holiday sinking fund, looking for a side gig, or getting a 0% APR credit card to manage carried-over debt.

“This is typically credit card debt is, is high interest,” the financial educator said. “So if you don’t have a 0% APR credit card, the interest rates are like in the twenties. We recommend focusing on that debt to try to get that down before adding to it.”

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