For many Americans, Christmas is one of the happiest times of the year, whether spending time with family or watching children tear open gifts.

But the holidays also represent a stressful time for families – especially when it comes to money.

According to a recent Gallup poll, 37% of Americans anticipate spending at least $1,000 on Christmas gifts this year. While this may not sound like much, it is when considering the economic plight of most Americans today. Earlier this year, it was reported that approximately 59% of Americans couldn’t afford a $1,000 emergency expense.

“We are essentially a paycheck-to-paycheck nation,” Mark Hamrick, Bankrate’s senior economic analyst, said. “Fewer Americans have the equivalent of a financial safety net to cover inevitable unexpected expenses, despite low unemployment and steady growth. This is one of the consequences of elevated prices stemming from inflation, the impacts of which are still being felt.”

What happens when we don’t have the cash to purchase the goods and services we want? We resort to swiping our credit cards – racking up large sums of debt in the process. It’s estimated that Americans will – for the first time in history – spend over $1 trillion this Christmas. Most of this spending will appear in the form of debt.

The average American in 2025 carries around approximately $48,294.20 of non-mortgage debt. It’s easy to attribute this debt crisis to external economic forces – be it inflation, the housing market, or student loans – but the fundamental issue is that people spend money they don’t have on goods and services they can’t afford. More than any other factor, the success or failure of personal finance has to do with mindset and motivation. Below are the top five reasons keeping Americans from being financially successful:

1) Poor budgeting habits: Whether you track every penny, use the cash envelope method, or use the 50-30-20 rule, budgeting is the single most important part of mastering personal finances. Personally, I’ve had the most success with the zero-based budget, supported and taught by Ramsey Solutions. A small hike in your rent or electrical bill can throw your budget off track, which is why it’s important to monitor your budget daily or weekly.

2) Not putting money away for the future: With the unending pressure to spend money right now – whether it’s purchasing the newest iPhone or clothing’s latest fashion trends – it can be difficult to hold onto money. The flurry of content posted to social media can make us feel as if we’re missing out on the latest thing. Yet we’re always going to face the choice of “living in the moment” or putting money away for the future, hence, this is where discipline must kick in.

3) Avoiding emergency fund saving: Putting money in an emergency fund is specially designed for those unexpected inconveniences that life throws our way. Whether it’s a flat tire or dishwasher repair, it’s meant for issues that need to be addressed quickly. It’s recommended that everyone has $1,000 saved in their emergency fund before tackling debts. This buffer prevents our monthly budget from getting derailed.

4) Relying on credit cards: Generally, credit cards are traps. One big purchase on a credit card with an exorbitant interest rate can be enough to keep someone from achieving financial freedom. As mentioned above, the average American has over $48,000 in consumer debt, much of which is due to irresponsible credit card purchases. Play it safe by paying cash for purchases.

5) Overspending: The practice of overspending is often the outcome of a lack of motivation and mindset around money. Psychology plays a significant role in the way we perceive finances and behave when money comes our way. While overspending can be a coping mechanism for the stress we experience in life, it can also be the way our parents handled money. Learning how to be smart with money means learning from those who have had success with it.

If we wait until external economic forces are perfect before we take our finances seriously, we’ll never achieve financial freedom. Poor personal finances can always be attributed to inflation or not being paid enough, but success with money is more about motivation and mindset. Learning how to be intentional with every dollar we earn is more than half the battle.

Maybe it means not going out to eat as much. Maybe it’s cutting back on the dozen streaming services for which we’re paying. Maybe that extravagant vacation to the Caribbean can wait one more summer. Whatever it may be, true financial success can be had by recognizing where we could be doing better and acting on it.

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This article was made possible by The Fred & Rheta Skelton Center for Cultural Renewal. 

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