A recent survey conducted shows that 84% of Millennials will use cash or debit cards for holiday shopping this year. This is great news! The use of credit has been overdone for decades and the results continue to take their toll on a lot of Americans. Unfortunately, credit allows us to stretch out the cost of items with payments over time making things seem more affordable. Maybe we can’t afford $500 today, but we tend to think that we can afford $50 a month for next ten months. The holidays make this scenario even more attractive since most people aren’t prepared financially for the increase in spending.
In the coming weeks, the news will be filled with statistics about whether holiday spending was up or down this year and how retailers were affected. But for us, the important news is what our credit card statements and bank accounts will look like in January (and beyond). According to wiseGEEK.org, financial experts suggest holiday shopping expenses should not exceed 1.5% of a person’s total income. So if my annual income is $25,000, I should limit my holiday spending to $375.00. If this amount seems reasonable for your holiday needs, you’ll be glad to know that the weekly deposit to save this amount is also 1.5% of income.
Annual salary = $25,000
Weekly Salary = $25,000 / 52 weeks = $480.77
Weekly account deposit = $480.77 x 1.5% = $7.21
Setting aside $7.21 each week to have what we need for the holidays sounds like a good plan, and apparently Millennials have some cash on hand to keep from adding to their debt. And this is definitely the smarter path to take.
Thanks for reading.