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Looking to Avoid Holiday Debt in 2020?

Wrapping Papers

By Christian Messemer, The Stewardship Shepherd


Understand the External Tactics and Internal Motivations That Drive You to Spend.

Thanksgiving is over and the “season of savings” has arrived. My TV and inbox are filled with deals offering me the lowest prices ever on a variety of products and services my family and I cannot live without. Businesses are getting more creative in how they approach this last dash for a profitable year. Instead of how much I have spent, marketers focus on how much I have saved. At the end of every transaction at a department store, as the cashier hands me the receipt, I am greeted with a statement informing me of the total amount of money I saved by shopping at X store today. It is a subtle but effective tactic. I’m no longer a spending, but a saving machine. If I listen too closely to these “accolades,” I will follow in the footsteps of 44% of American consumers who blew through their holiday budget and incurred significant debt.


Debt from Holiday Spending Increases Each Year

Each year consumers spend more than they have available on gifts for the season. From 2015 to 2019, debt attributed to holiday spending increased almost 8% per year. If this trend continues, in 2020 consumers will overspend by $1,428.  .



Chart One: Increase in Consumer Debt from Holiday Spending from 2015 to 2019 (2020 EST).[1]

Incurring holiday debt is not a problem provided one has a plan to pay it off before incurring any interest charges. However, for most borrowers, a one month pay-off is not in the plan. In a survey of consumers from the 2019 holiday season, seventy-eight percent (78%) of those who used a credit card for holiday spending did not pay off their balance by January of 2020.[1] By not paying off high interest credit card debt, borrowers risk costly interest charges [2] If indebted spending goes up again this year, interest costs will do the same.

Although disappointing, a 2020 survey on the topic of holiday spending had good news. Thirty-three percent of respondents planned to spend less in 2020 and only nine percent plan to spend more.[3] Whether expectation becomes reality, remains to be seen. If staying within your means is the goal this season, you need to overcome the external tactics and internal motivations that drive the desire to spend.

External Tactics 

We begin with the external tactics, i.e., those tactics businesses use to entice you to spend. I am sure the list is far more extensive than the one presented here, but I know the three below are effective, because they have encouraged me to bust a budget or two.

  • Opening a Charge Card for a Percent Off

  • Spending More for “Rewards”

  • Spending More because of a Good Deal

Opening a charge card in exchange for a percentage off your bill is the go-to move for retailers. Why? It produces results. In the short-term, you are going to put the balance of the purchase on the card and the likelihood of me paying it off immediately moderate at best. Thirty-seven percent of charge card holders carry a balance, so, in the long-term, the retailer knows it will recoup any discounts given through interest charges.[1] Retailers also know that they can entice you to continue to use the card by incentivizing you to do so. At many retailers, they provide a percentage off the day’s purchase if you use your card. 

A second tactic is tying a reward to your spending amount. Kohls is the retailer most associated with this concept. For every $50 you spend, you receive $10 in Kohls cash, which is redeemable at a later date. This can be a great deal, provided you use it judiciously. I cannot tell you how many times I have stood in line and heard the cashier say, “You are X dollars from a reward. Was there anything you wanted to go back and pickup?” Often, the answer is yes, which increases the sale. Even better, you feel rewarded for spending more. Two weeks later, when the in-store-cash is spendable, you return and find an item that reduces but does not completely cover the price. Even if it does not fit in the budget, you justify the additional spending because you do not want to “waste the rewards.” 

A final tactic businesses use is to show you your savings amount, or to provide a discount that increases as your purchase order increases. This crafty move looks to shift your perspective from spending to saving. If you are spending $300, you are focused on the budget and are less likely to go over budget. If you are saving 20% by spending $300, you are focused on the $60 in savings and are more likely to go over budget for the sake of a good deal. By concentrating on the $60 in savings, you ignore the $240 you spent. This change in your thinking influenced your entire purchase decision.

It is not just the external tactics from which you must protect yourself. In my experience, the external tactics marketers use are only effective if they validate your internal motivations for spending.


Internal Motivation 

While external tactics examine how businesses entice you to spend, internal reasons focus on the beliefs and reasons for why you spend. These reasons weaken your resolve and make you more susceptible to the external tactics used by marketers. External tactics hold no power when you are firm on why you are spending what you are spending. When I examine my spending, there are four reasons that influence my why. 

  • Spending equals value

  • Competition

  • COVID guilt

  • Grasping for autonomy and normalcy

When I was younger, every year my elementary school hosted “Santa’s Workshop.” This event allowed younger children to purchase inexpensive gifts for their family members at Christmas. Parents would send money with their child and our job was to pick out a gift. There was something for every price range. I still remember the emotions I had when I picked out something for my mom, dad, and two sisters. And though the sum total for all four gifts was probably under $10, I beamed with pride as I payed for these gifts and anxiously awaited to see the faces of my family come Christmas morning. As you grow older and begin to earn an income, something changes. It becomes less about someone’s desire to gift you something of value and more about the value of the gift. In this new paradigm your value to me is directly correlated to how much I spend on you. When taken further, I view gifts to me through this same paradigm. The value and not the thought reigns supreme. The gift, and not the motivation behind it, takes priority. This belief system necessitates high dollar spending for those we care about the most.

A second motivation is competition, and it takes many different forms. We may compete against our past. Perhaps you grew up in a family without financial means and promised yourself that your family would always have a better X than you did as a child. If not your past, you may be competing against others. We never want to feel like we have come up short of expectations. It is our desire to avoid disappointing a spouse, child, or other family member that may cause us to overspend. I want my kids to go back to school and be excited and proud to tell their friends what was under the tree this year. I want to be the uncle that is known for the “good gift” and not the one my nieces and nephews open as a last resort. The problem with competition a competition mindset is that you never win. You may outspend someone, but in outspending you ostracize the gifts of others. You may outspend and go into debt. Or, your mentality will force you to go bigger and better the next year. This mentality eventually creates a no-win spending situation.

The final two motivations are specific to present COVID pandemic. I begin with COVID guilt. The holiday season revolves around family and friends, with Thanksgiving kicking off a thirty-day period of parties, travel, meals, and time off spent with loved ones. Many of us look forward to this period all year long. Unfortunately, COVID has drastically reduced or cancelled these plans. As we struggle with the guilt of not traveling to visit our families it is easy to attempt to compensate for this loss of time through material gifts. Guilt can be costly. The final motivation is also related to COVID, and our desire to regain some of the autonomy and normalcy we have lost over the past nine months. 

COVID restrictions have temporarily changed how we interact with the world around us. When at church or in the store, I do not see facial expressions of those in the crowd, nor can I smile at passersby. In the checkout line, conversations are less friendly and more transactional, as no one wants to delay getting out of a public area where COVID may be lurking. When my children go to school, they cannot hug their classmates or sit next to friends at lunch for fear of possible contamination. At a time where I am told where I can go, when I can go there, and how I need to dress when I go, I look for places where there are no restrictions. COVID may have closed our favorite restaurants, required facial coverings, inundated us with medical data and infection statistics, and kept us six feet away from people at all times, but it cannot dictate how much money I spend or where I spend it. In this environment, it is easy to focus on our spending as a means by which we regain our autonomy and find normalcy. 


The season of savings has arrived, and if you do not want to follow in the footsteps of 44% of consumers who “save themselves to debt,” you need to understand the external tactics and internal motivations that drive the desire to spend. External tactics are those used by businesses to encourage spending. They include opening a charge card for a percentage off you total purchase, spending more for rewards, and encouraging you to focus on how much you save versus how much you spend. Internal motivations are the reasons behind your spending, you’re your “why.” Common motivations are equating the amount spent with one’s value and competition. Motivations that have come about due to COVID are guilt and attempting to regain one’s autonomy and normalcy. Once you come to grips with your internal motivations, external motivations and the spending that come with them, hold less power over your decision making.

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