myFICO Blog

[#1]

According to a recent Holiday Spending Survey of more than 3,000 myFICO® customers, folks continue to be most concerned about their credit card debt – almost 40% – as 2011 looms, which was about the same percentage that shared such concerns last year when polled by myFICO®.

Click to enlarge.

Along with this 40% of worriers is the additional almost 30% who, while still concerned about credit card debt, are now even more concerned about their ability to finance large purchases, such as a home, school, or a car in the coming year. Taken together, almost 70% of respondents are worried about their financial future. Not good news, but understandable.

So, how did those surveyed plan to spend this holiday season? Some of what we learned was:

• Almost half expect to charge an average of $100-$500 more than usual during the Holidays
• 75% say they'll be changing some holiday traditions this season due to the economy, such as gift giving and travel plans
• 58% don't prepare for holiday spending, but know they'll be spending more than usual

While 35% of respondents plan to use debit cards and 15% will use cash – great ways to stay out of debt – some other positive signs emerged that reflect an increasing awareness of the importance of responsible credit management. Among the other 50% who plan to whip out that plastic this season:

• 75% of those charging plan to pay their balances in full by the end of the month
• More than 75% of those charging expect to keep their credit card balances at less than 30% of their credit limits
• 80% say they won't open new retail cards this season – with almost half stating the reason as not wanting to "ruin my credit by opening unnecessary cards"

What's it all mean? For me, it's good to see that folks are acting on their legitimate financial worries by adopting sound credit management practices, like minimizing their charging, keeping their credit utilization low when they do charge, and refraining from opening new retail cards. That's good news!

Author: Barry Paperno serves as community manager for the myFICO® Forums and consumer operations manager for FICO®, where he has advised consumers and businesses on FICO® credit scoring since 1995.

[#2]

I wasn't planning on spending any more this year than last but life got in the way once again. Within 2 weeks my desktop, laptop, and one of my TV's all gave up the ghost so this is an electronics Christmas I guess. Luckily though I won't have to go into debt because of it. I had enough in my savings to pay for everything.

There was a time not that long ago that I couldn't say that. I have to say I am truly blessed.

[#3]

We set aside money in a holiday account throughout the year. This year, we've actually spent less than we usually do, thanks to competitive bargains and rewards programs. These days, we pay for just about everything with a credit card, but on a "card to cash" basis-- meaning that we pay in full right away. This guarantees that our credit card "Rewards" are really "free", we get extended warranties on most items, and that we don't throw away our money on interest.

[#4]

marinevietvet:  Congrats on the new electronics with no new debt!  While I'm happy for you, I'm even more happy for the community knowing that you'll be able to keep moderating these boards with no interruptions!  * fingers crossed *

LilMirth:  Great idea, setting aside holiday money all year long.  You've got more discipline than the majority of those surveyed (58%) who don't prepare for holiday spending. 

Anyone...have any specific ideas to share on how you motivate yourself to continue to put money into -- or at least not touch -- the fund before the holiday season?

[#5]

As embarrassing as this is to admit, DH and I forced ourselves to set firm savings goals (in an established holiday fund) to discipline ourselves into not over-indulging our kids during the holidays. <blush> We have savings accounts for retirement, education for our kids, an HSA, vacations, and an emergency fund-- automatic deposits that we never touch or concern ourselves with until it's time to use it. 

I think that when it's a relatively small amount of money, taken out on a regular basis, automatically, you just don't miss it. You sort of forget about it, and it becomes non-essential to your weekly/monthly budget. Still, it builds up over time, and by the time it's significant enough to raise your eyebrow, and you start feeling the itch to spend it on something, it's actually time to spend it-- the holidays will have arrived!

Another thing that helps-- For non-essential savings (meaning, not being critical for our future well-being), we don't have check/debit cards, and we don't use local banks/credit unions. It makes it a little more difficult to *get* the money should we ever get the idea to spend it ahead of time, on something that we didn't designate it for. It gives us time to think twice, and requires some effort to obtain.

Finally, I guess we sort of look at forced holiday (all other savings as well) savings the way we look at the allowance that we pay our oldest two children. Once earned, we don't take it back. It's there for the holidays, and that's how we want to use it.

[#6]

This year we tightened our Christmas budget.  Cut it in about half.  And you know what?  We're having fun!  All the Christmas shopping is done, we have some fun gifts that we're happy to give to all those family members we love so much!  We maybe got a little more creative.  We really didn't do anything homemade to save money this year, although we've done that in previous years - but sometimes that can be very time consuming and stressful (and even expensive).  We do start picking things up in October.  A lot of times you just see something when you're out and about, so we just pick it up then - specially if it's on sale.  Then a chunk of our shopping is done before the holidays even hit.  This year, we even kept the holiday events schedule somewhat simplified.  We kept our lists of who to buy gifts for simple.

We keep track of what we spend each year & we budget for it - but not throughout the year.  Our budget is setup so that it's budgeted late in the year (our expenses are lower the last few months).  And this year having high legal expenses made a real impact - so we responded by lowering the holiday budget rather than getting in over our heads.

We use our cards for everything and pay it off immediately.  If we don't have the cash, we don't buy it.  Like L'il Mirth says, that budget helps us discipline ourselves into not overindulging our kids (or ourselves) during the holidays.  It really makes Christmas relaxed and fun. 

Speaking of gifts - anyone know what DH got me?  I'm not getting a single hint from that man.........

[#7]

I think this is great from all the post that I've read. Not only Budgeting or managing your credit  for Christmas, but for the next six to nine months. We always have to try and be prepared for the unforeseen. My family and I decided to spend Christmas "Gift Free" for the first time and to see how much stress and debt we won't be committed to and still have a great time!!

[#8]

Let us know how your "Gift Free" Christmas goes, bhill40!  Are you doing anything fun in place of gift giving?

[#9]

I think a "gift free" Christmas is a great idea. I bet you will enjoy it although I'm not sure how children might feel about it.  :-)

[#10]

I have always had a savings account for Christmas. I deduct a standard amount automatically from my checking account each month. And put it into a Christmas account..

[#11]

We did a stay at home, no gift holiday this year.  Fixed a special meal, tried a new recipe, worked around the house.  It was great!

We hope - but can't be sure - that this holiday season 2012 will be different.  But we are firm about cash only, no debt, etc.

Congrats to everyone who did great this past season!

[#12]

Congrats IOBA!  It's nice to hear a recap after the holiday season is over.

This past weekend, we spoke with a bunch of friends and neighbors about what made the holidays fun and not-so-fun.  Going into debt is definitely a holiday downer.  Spending time with family and friends was the #1 thing that folks loved - that and the spirit of the season.

I love that you are firm about cash only - no debt.  Makes the holidays a TON merrier!  We've done it, also, for almost 30 years and our kids LOVE LOVE LOVE the holidays without extravagant spending.

[#13]

I suggest increasing your withholdings that way you have a backup plan in case you do get in dept you can cover it with your refund.  If you file early you can have the money by March 1st.  The government needs the "loan" anyway.

[#14]

Instead of giving the government an interest free loan for a year would that money not be better spent during the year on existing bills and paying down debt?

Just my opinion.  :-)