Don't let Black Friday cast a black cloud over your financial forecast

Giving is good. Giving is fun. Giving is what makes the holidays so darn holly jolly.

Giving too much, however, is neither good, nor fun, nor all that especially holly jolly.

It’s easy to get swept up in the spirit of the season, and no single day of the year invites you lose yourself in the thrill of giving quite like Black Friday. And despite the rise of online shopping and allure of buying earlier in the season, people still love shopping on the day after Thanksgiving. The average American consumer spent $423 on Black Friday in 2012. That’s up from $399 per person in 2011 and $365 per person in 2010.

The deals are undoubtedly great, but there are long-lasting consequences to getting caught up in the rush of Black Friday mania.

The National Foundation for Credit Counseling recently noted the following eight ramifications of overspending during the holidays:

  • Doubling down on debt. Adding new debt on top of old debt is never a good idea, yet many people will enter the 2013 holiday shopping season still paying for 2012 purchases. By overextending yourself during the holidays, you allow those charges (and their interest charges) to follow you through the new year – continuing to impact your personal budget well after the tinsel and bows have been packed up for another year.
  • Interest on interest. When a debt is not paid in full by the due date, interest is added to the balance. Now you’re not only paying for your purchases or for the interest charges on those purchases, you’re also paying for the interest charges on your interest charges!
  • Falling behind. The bigger your balance, the harder it becomes to manage your bills every month, leading to late payments and balances that rise past your limits. Once you start adding late fees and over-limit fees your balances quickly get out of control.
  • Credit hits. Not being able to pay your bills as agreed could result in negative notations on your credit report, with late or missed payments remaining on the report for seven years. Usually such delinquencies will have a negative impact on your credit score as well.
  • Nothing left to spend. By overextending yourself and hitting your credit limits, you risk the possibility of leaving yourself without the safety net of available credit for future purchases, unplanned expenses or emergencies.
  • Nothing left to save. Spending so much every month to pay back old debts leaves you with nothing to save or invest. And having no savings puts you in a dangerous position should the unexpected strike.
  • The downward spiral. Not being able to pay your bills on time can be the first step on a path that includes collection efforts, lawsuits, judgments and wage garnishment.
  • Mortgaging your future. Once you’ve started spending past your means, overextending your credit, missing payments, and encountering debt collectors, you put yourself in a dire financial place, and may be forced to do further damage to your financial wellbeing by taking out payday loans, selling your possessions at a pawn shop, attempting to settle your debts or even filing bankruptcy.

So don’t get swept up in the thrill of great deals this Black Friday. Set a budget and stick to it. Keep your spending in line. Consider regifting as an alternative to spending more money.

You can have a great holiday season without starting the New Year off in untenable debt. Be smart. Be firm. And have a happy holiday!

Jesse Campbell is the Content Manager at MMI, focused on creating and delivering valuable educational materials that help families through everyday and extraordinary financial challenges.

  • The Consumer Federation of America (CFA) is an association of nonprofit consumer organizations that was established in 1968 to advance the consumer interest through research, advocacy, and education. Today, nearly 300 of these groups participate in the federation and govern it through their representatives on the organization's Board of Directors.

  • Since 2007, the Homeownership Preservation Foundation (HPF) has served as a trusted, neutral source of information for more than eight million homeowners. They are partnered with, and endorsed by, numerous major government agencies, including the U.S. Department of Housing and Urban Development and the Department of the Treasury.

  • The mission of the U.S. Department of Housing and Urban Development (HUD) is to create strong, sustainable, inclusive communities and quality affordable homes for all. HUD works to strengthen the housing market in order to bolster the economy and protect consumers; meet the need for quality affordable rental homes; utilize housing as a platform for improving quality of life; and build inclusive and sustainable communities free from discrimination.

  • The Council on Accreditation (COA) is an international, independent, nonprofit, human service accrediting organization. Their mission is to partner with human service organizations worldwide to improve service delivery outcomes by developing, applying, and promoting accreditation standards.

  • The National Foundation for Credit Counseling® (NFCC®), founded in 1951, is the nation’s largest and longest-serving nonprofit financial counseling organization. The NFCC’s mission is to promote the national agenda for financially responsible behavior, and build capacity for its members to deliver the highest-quality financial education and counseling services.