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The Mental Health Price of Holiday Overspending

Men walk by a window display with “sale” prominently displayed, showing how holiday overspending may impact to our mental healthEven if you didn’t go Black Friday or Cyber Monday shopping, you may already be concerned or even stressed about your holiday budget.

According to Gallup, the average American shopper plans to spend an average of $923 on gifts in 2023.

“Nearly nine in 10 adults say they will spend something on Christmas or other holiday gifts this year, even if only a minimal amount,” according to a Gallup news release. “However, the majority plan to spend at least $500, including 35% who say they will spend $1,000 or more.”

And holiday overspending isn’t just limited to gift-giving.

“Whether you need to travel long distances to see family, always throw an over-the-top party, or want to spoil your kids, the costs cause many to ring in the New Year with plenty of debt,” said Laura Adams, MBA, a personal finance expert with Finder, in Yahoo! Finance.

While some are excited by the prospect of giving lots of gifts and spending money on travel this holiday season, holiday overspending, going over budget and facing financial strain may have a detrimental impact on mental health.

Why do we overspend for the holidays?

“For most people, there is no budget when it comes to holiday gifts,” money management expert Guadalupe Sanchez of Budgeting in Blue told Yahoo! Finance. “Our mentality is to buy, buy, buy, regardless if we can afford it or not. The thought of paying it off comes after the fact. It’s unfortunate because that’s usually the spending mentality throughout the year, not just around the holidays. It just gets worse during the holidays.”

One of the primary reasons people indulge in holiday overspending is simply expectations. Many ads show lavish gifts – diamond watches, big bows on luxury cars, and vacations to the Caribbean – and people feel the need to “keep up with the Joneses.” This fear of falling short can cause individuals to accumulate debt so that their spouse, children, family and/or friends have a “good” holiday.

Nostalgia is another reason.Girl puts up pictures from years gone by on wall with Christmas lights showing how nostalgia may lead to holiday overspending

“Holidays were a special time for us as kids. They are now a special time for us as adults. Presents, as well as other holiday expenditures like decorations, parties, food, and travel, are crucial elements of our memories. So as we aim to make the current holidays as special as those we remember, both for us and now for our children, we’re willing to spend money to make that happen,” said Sam Greenspan, head of content for Los Angeles-based e-commerce-focused tech company Demand.io in Yahoo! Finance. “There’s no financial ceiling on what we’ll spend for those nostalgic feelings.”

Another reason for holiday overspending may be driven by social media. When you see your friend’s matching pjs, huge feasts, and extravagant gifts, it’s easy to feel jealous and feel inadequate. Constant exposure to these seemingly over-the-top holiday experiences may drive you to overspend in an attempt to keep up with your peers. This constant comparison can take a toll on mental health, contributing to feelings of anxiety and depression.

How mental health is impacted by holiday overspending

Once the season is over, the reality of holiday overspending sets in. Holiday overspending can have immediate and long-term financial consequences. Some people may “max out” their credit cards or take out high-interest loans to cover their holiday expenses. That means starting out the year with a pile of debt that may take months – or even years – to repay.

As a result, people are left grappling with the consequences of their financial decisions, and this can lead to a range of negative emotions, from regret and guilt to shame and self-blame. These emotions can significantly impact mental health, leading to increased stress and a decreased sense of well-being.

“There are many reasons why individuals choose to work with a financial therapist, but mental health is ultimately at the root of each,” Lindsay Bryan-Podvin, a biracial (Filipina-white) female social worker-turned-financial therapist, author, speaker, and the first financial therapist in Michigan, told Forbes. “Money and emotions are highly interconnected. In fact, behavioral finance experts agree emotions drive financial decisions between 80–90% of the time.”

Mental and financial health may be intrinsically linked.Drawing of a piggy bank with band aids over the cracks, showing how holiday overspending may lead to poor mental health

“High levels of financial stress, as with other stressors, can manifest themselves through physical symptoms such as anxiety, headaches/migraines, compromised immune systems, digestive issues, high blood pressure, muscle tension, heart arrhythmia, depression and a feeling of being overwhelmed,” according to a Purdue University news release.

“Health issues then present increased medical expenses, which worsen already tight money situations,” says Amanda Hathcock, employee assistance counselor at the Center for Healthy Living (CHL), who was quoted in the news release. “It’s important for individuals to have support to help them process this cycle of overlapping stressors so they can hopefully slow the cycle and head in a new direction that leads to some relief.”

Protecting your budget – and your mental health

It’s easy to say “spend less” but for many that’s not realistic. Creating a plan that best fits your needs and sticking to it is important. Some components may include:

  • Set a realistic budget: This means not only budget for gift giving, but for travel and other expenses. You may need to prioritize essential expenses and hold off on some purchases until after the holidays.Button with GeneSight logo and text learn more about the GeneSight test
  • It truly is the thought that counts: Before you shop or buy, think about the reasons you may be making that purchase. Is there something that may be more meaningful? A shared experience or heart-felt letter? For some, rather than material possessions, a gift from the heart may mean more.
  • Communicate about your financial constraints. Maybe you lost a job or had unexpected expenditures over the year and your budget isn’t what it used to be. Maybe you are wanting to save for a house or a car. Or maybe you just don’t want to go overboard this year. Regardless of the reason, communicating your plans well in advance may avoid awkwardness during a family gathering. You could suggest a gift exchange or a gift to a favorite charity over material gifts.
  • Shut down the social media apps. If seeing your neighbor or high school friend’s over-the-top celebration makes you want to “shop ‘til you drop” put down your phone and indulge in a different holiday activity. Go ice skating, bake cookies, put together a puzzle or read a good book.

With careful planning and being mindful of why and how you spend, financial stress and the impact to your mental health doesn’t have to hit so hard in January.

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