Disclosures

SHARE IT
spending

Spending Habits of The Rich and Not So Rich

Are you spending like the rich this holiday season – even if you’re not a millionaire?

Many Americans are indeed engaged in over-the-top spending.

But there’s one big difference between those from average-income households and individuals from truly wealthy families: the average consumer trying to “live large” is paying for those extravagant holiday purchases with credit instead of cash.

Here’s a snapshot of who is spending what, and how all those gifts, decorations and seasonal items are getting paid for this holiday season.

If you’re like the typical American celebrating Christmas, Kwanzaa and/or Hanukkah in 2014, you’ll probably spend a little more than $800 this year, according to the National Retail Federation.

But those with very deep pockets – wealthy investors with a net worth of $5 million or more – are most likely to spend $2,000 or more on holiday gifts. That’s the result of a recent survey from Spectrem Group’s Millionaire Corner.

If 2,000 bucks sounds like a lot of money to shell out during the holidays, consider this: many uber wealthy folks actually don’t mind spending five or six-figure sums for loved ones during the holidays – especially when those dollars are being spent on things like phenomenal, customized experiences or one-of-a-kind jewelry pieces.

Which takes me back to how the rest of us are spending.

What does it do to a person (of any income level or any net worth) if they see those around them and others living it up during the holidays — buying a luxury car, taking a fabulous trip or plunking down $25,000 at Tiffany’s without batting an eye?

In many cases, it seems, people start engaging in “aspirational spending,” buying things they can’t necessarily afford simply to emulate the well-heeled people they envy.

Unfortunately, the way this plays out for ordinary Americans is that a lot of them drive themselves into debt during the holidays.

For example, a 2014 study on holiday spending from Experian Consumer Services shows that 36% of consumers anticipate spending more on holiday shopping this year, compared with 25% who anticipate spending less. Equally noteworthy: only 38% of consumers are putting aside a budget this holiday season, and most of those polled (62%) plan to pay for their purchases via credit or layaway, Experian found.

Experian’s data echoed, in some ways, the findings of another survey from TransUnion, which revealed that 80% of holiday shoppers planned to use their credit cards to buy gifts.

Even more telling, though, is a 2013 study from Lexington Law, which showed that 57% of American parents planned to take on debt in order to buy holiday presents for their children.

No word from Lexington about how parents are feeling this 2014 holiday season. But I would guess the numbers probably haven’t changed much over the past 12 months. If they have changed, parents’ willingness to go into debt likely has increased – if only because the economy has improved from a year ago and we’ve gotten further away from the stinging effects of the Great Recession.

Interestingly, those with lower incomes were more willing to go into debt in order to spend on their kids, Lexington Law researchers discovered. People with household incomes below $35,000 reported that they were willing to rack up an average of $700 worth of debt in order to make their children happy for the holidays. By contrast, those with household incomes of $75,000 or more were only willing to accrue $300 worth of debt to buy holiday gifts for their children.

Perhaps that’s why those who are wealthier get – and stay – that way. They don’t engage in unbridled spending on material things just for the sake of doing so, and certainly not if it’s going to set them back.

It’s a lesson we all should keep in mind, whether you’re currently a millionaire or you simply hope to become one some day.

Scroll to Top

Stay Informed with Our Exclusive Newsletter!

Subscribe to our newsletter and never miss out on the latest updates, exclusive offers, and insightful articles.

We respect your privacy!