Holiday budgets estimated for Arkansas consumers, credit experts warn against excessive holiday spending

Lower fuel prices, higher home values and better job outlooks have American consumers feeling more confident heading into this holiday season, but credit experts warn that credit card debt will balloon this year by more than $60 billion in additional debt.

The National Retail Federation predicts holiday spending will be the highest in its survey history at $805.65 per person this year. That’s roughly $3 more per person than spent last year. 

MasterCard reported Wednesday (Dec. 2) that overall retail sales – excluding autos and fuel – rose 4.6% in November, but Black Friday sales were down and sales for the entire Thanksgiving week were up only 0.3% compared to the same period in 2014. The biggest drop in sales was at physical stores, with MasterCard reporting that online sales were up 16% in November.

ARKANSAS HOLIDAY SPENDING ESTIMATES
A recent report by WalletHub found that Arkansas consumers have varied holiday budgets this year ranging from a high of $811 in Springdale to a lower spending threshold in Fayetteville of $476. This lower budget relates to the high concentration of college students and young adults living there. The Springdale/ Northwest Arkansas budget of more than $800 ranked No. 281 on the list and was on par with cities like San Antonio, Texas and Asheville, N.C.

In Fort Smith the holiday budget found by WalletHub was $700, was $1 more than Tyler, Texas, and $3 less than in Largo, Fla. The Fort Smith average holiday budget was roughly one-third of that in Allen, Texas ($2,186) or Sunnyvale, Calif.,($2,076). The highest city holiday budget was Palo Alto, Calif., at $2,886 this year.

In central Arkansas holiday budgets ranged from $834 to $667 between Little Rock and North Little Rock, respectively. Jonesboro’s holiday budget came in at $765, according to the WalletHub report.

The WalletHub analysis calculated holiday budgets for 563 cities across the country by examining income, age, debt-to-income ratio, monthly income-to-monthly expenses ratio, and savings-to-monthly expenses ratio. WalletHub experts said more than one-third of consumers likely exceeded their budgets for holiday spending over the recent Black Friday weekend and Cyber Monday sales.

HOLIDAY BUDGET STRATEGIES
While holiday spending is driven largely by economic climate and consumer sentiment, experts said too often shoppers can often get caught up in the moment with impulse buys during the holiday season which can add stress to their finances for the entire next year.

Fred Selinger, business professor at University of California at Berkeley, said if budgets are tight consumers should tap into their creative sides and perhaps offer services like baby sitting or caring for pets in lieu of gifts. He said hosting a holiday party can also help families focus on the spirit of the season without resulting in a pile of unpaid bills come January.

Donald Dutkowsky, economist at Syracuse University, said having a budget you can live with and using cash or debit cards will often help consumers avoid overspending during the holidays. Both experts said consumers should plan for their holiday purchases all year long by setting aside some of their pay each month to a Christmas shopping fund.

Not all the experts believe consumers will spend aggressively this holiday season despite the record Cyber Monday sales reported earlier this week. Jack Cichy, a business professor at Davenport University, said consumers should be somewhat cautious this holiday season given that employee raises ranged from 2.5% to 3%. He said just because raises were on the lean side doesn’t mean consumers will spend less, but they will be looking for bargain pricing.

“And this cautiousness will carry over to consumers doing their research on best pricing scenarios on the Internet as well as in brick and mortar stores,” Cichy said.

His advice to shoppers is to buy only what they afford without adversely impacting their ability to meet their fixed monthly expenses. He said using credit card lines during the holidays can stretch the family budget and create buyer’s remorse well after the holidays are over.