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Key Takeaways
- 62% of high-income families ($300K+) carry credit card balances despite substantial earnings
- The 'bandwagon effect' drives holiday spending to match peer groups regardless of actual affordability
- Money problems are math wrapped in emotion – holidays amplify this through relationship-tied spending
- Distinguish between 'squeezed' (forced cutbacks) and 'pre-squeezed' (unsustainable overspending)
- Gift experiences and time rather than expensive items to break the spending cycle
- Start monthly Christmas savings now for next year to avoid repeating the debt spiral
Full Transcript
Click to expand transcript
Steve Rhode: Back with the Get Out of Debt Guys. This is the old Get Out of Debt Guys show. I’m Steve Rhode, the old authentic wrinkled aged bald Get Out of Debt Guy, and with me as always is Damon Day, the new Get Out of Debt Guy. Say hello, Damon.
Damon Day: Hey everyone.
Every weekday I read the enforcement actions, filings and fine print the outlets skip, and turn them into the one or two moves that actually improve your position — a rate worth moving for, a fee you can refuse, a deadline to beat before it costs you.
In the latest issue (Sep 25): The line, not the work
I write Your Money Actually most weekdays — actionable money information you will not find anywhere else, and the small decisions that compound. It is free, I sell nothing, and I take no money from any company I write about.
Steve: You know it’s December and you’re about to drop another what, 500, 3000 dollars on gifts probably. I know, I know, that’s for the mail lady, on gifts you can’t afford for people who don’t need them. I mean honestly, I tell all my friends and family don’t get me anything. I don’t need anything.
Damon: I actually can attest to that is true. He tells me that every year for the last couple of years – don’t get me anything, don’t send any cookies, don’t send nothing.
Steve: No, I would much rather have time and friendship than I would another pair of gloves or cookies that will be consumed.
Damon: That’s because you’re aged.
Steve: I know. But you know, I guess how we all get to that point.
Damon: Experiences. We want experiences.
Steve: You know people spend money a lot on gifts to maintain an image that’s already crumbling and somewhere in the back of your mind there’s a number. You know that number – a number you haven’t looked at in weeks, maybe even months. A credit card balance – or five of them. Maybe you know it’s bad, you just can’t deal with it right now. I mean, not during the holidays. Damon and I get it, and today we’re going to talk about exactly that – why you’re avoiding it and what it’s actually costing you and what you can do about it right now.
Why Holiday Debt Avoidance is Normal
Steve: All right Damon, let’s talk about why the avoidance is normal and why we see the same sort of thing every year.
Damon: Well, it’s because it’s ingrained into us. The Christmas season is about happiness and joy and giving and generosity. That triggers dopamine. That’s fun. Nobody wants to think about financial issues. They want to have fun and spend time with family. And it’s easy to say I’ll worry about it in January.
Steve: You know, years ago I ran a contest – it was the Frugal Santa Contest – and from all of my clients, I think we had 20,000 clients at that time, we solicited feedback on what can you do to make Christmas more frugal. Some of the tips were good. Some were alternative tips, like one was you need to smoke more cigarettes before the end of the year so you can get the reward points to turn in for gifts.
Damon: Yeah, and you know, this podcast is not going to be about canceling Christmas. It’s just more about being mindful of what you’re doing and what you’re spending and maybe how to not feel so bad come January.
Steve: You know, it’s funny, when Pam and I were first married and had zero money, we had a couple of Christmases where everyone got five bean soup as a gift. We made the mix and wrote out a very nice recipe and wrapped it nicely. It was something we did together from the heart that took time and effort. And it’s funny, 40 something years later, people still talk about that as an amazing gift. It cost us almost no money.
The Bandwagon Effect and Holiday Spending
Steve: That whole unconscious spending thing about needing to maintain an image – that’s where things get really dangerous. There’s a behavioral economics theory called the bandwagon effect, where you are more likely to spend the same amount, the same way, as the people that you see as part of your group. So if other people are over-decorating and doing all this stuff, that doesn’t mean they can afford it either.
And here’s the fact that always surprises me – for people who make good money, 62 percent of people earning a family income of $300,000 or more are carrying credit card balances. So you’re not alone.
The Squeezed vs. Pre-Squeezed
Damon: I was reading a stat – they’re projecting over a trillion dollars spent this holiday season. Consumer spending with a T. And the divide between higher earners and lower income earners is interesting – higher income earners were planning on spending more money than normal, while the lower income earners were actually actively cutting back.
Steve: Yeah, it’s almost like there’s two camps – you have the squeezed and the pre-squeezed. The people who make good money, we know they’re going to carry credit card balances. They’re just looking richer.
Damon: Two hundred thousand dollars five years ago was very different. The lifestyle you could have at two hundred thousand five years ago looked very different than today. A lot of people are not even trying to keep up on purpose – they’re just trying to maintain, but they’re getting pre-squeezed.
Money Problems Aren’t About the Money
Steve: When you’re feeling more squeezed and everything is getting expensive, it’s very easy to rationalize – this year’s been tough, we should really make this good for the kids.
One set of clients stands out to me. A husband and wife were arguing about money. He was yelling why can’t you stop spending? And she blurted out probably the most honest, insightful thing. He asks why are you spending so much money on the kids? And she says, “Because they show me they love me.”
Sometimes money problems are not about the money. It’s just math wrapped in emotion.
Holiday Shame Hits High Earners Harder
Steve: Why is the holiday shame thing deeper for people making good money? Part of the reason is they always think, oh damn, I should have known better. But this is not about logic or math. The holidays are about emotion and maintaining an image.
Survey data tells us that high earners are more likely to lie about their debt than lower earners. If you’re already squeezed, the game’s up.
Damon: It’s all about keeping up the appearance. Keeping up with the Joneses. Like my friend group is going to this holiday party. Chances are most of those people are feeling the exact same way you are, but it’s kind of like who’s gonna break first?
Steve: There was a book called The Millionaire Next Door. The people who actually have the most money are those that shop at JC Penney, driving an older or used car. They’re not trying to spend up to the image.
Lifestyle Creep
Damon: Without having a plan, no matter how much money you make, your expenses always tend to rise to meet your income. You’ll see people making $250,000 a year struggling month to month. Four years ago they were making half what they’re making now and yet they’re still broke. Where did the extra $100,000 go?
Steve: It’s that lifestyle creep. If you don’t have a plan for that extra money, it just will creep in because it’s there.
What You Can Do Right Now
Steve: Now I’m going to say something surprising – your income isn’t the problem. Your income is actually your biggest asset. We’re not talking about canceling Christmas. We’re talking about not making January worse.
Damon: The very first thing is identify where you’re at right now and what you can realistically afford to spend on the holidays, then work backwards. Don’t just say screw it, we’re going to go hog wild and put it all on credit cards – because that’s what you did last year.
Gift Your Time
Steve: One thing that’s much less expensive than buying high-price gifts is to gift your time. I’d much rather have a friend call me up and say let’s go for lunch, spend two hours chatting. That is so much better than another box of crap.
The Christmas Club Strategy
Steve: When I was a kid there was a thing called the Christmas Club or Christmas Fund, where people would set aside money every month going towards Christmas. Take what you spent this year, divide by 12, and start saving that amount every month.
Damon: There’s apps, programs, software that can do the same thing digitally. Even the Acorns app – you can set up a recurring monthly deposit and let it grow.
This Show Is For You
Steve: This show is for people who make good money but are drowning in debt anyway. If you feel lost, alone, embarrassed, ashamed, confused – that’s what this show is for. We’re not going to tell you to stop buying lattes or go make a spreadsheet. We’re going to talk about real solutions like debt settlement, getting a strategic approach, the value of professional help.
Your Action Step
Steve: Here’s an exercise for you. Open your credit card app – or apps, because we all know you have more than one. Look at the number. Just look at how much you owe. You don’t have to do anything about it today. That’s just step number one. Just look at it.
Download the free Holiday Debt Reality Check at GetOutOfDebt.org.
You make good money. You’re not bad with money. You’re just in a situation that requires a strategy – not yelling at you, not a lecture. Until next Thursday – see you. Peace.
Frequently Asked Questions
Why do high-income earners struggle with holiday debt?
High earners face unique pressure to maintain appearances and match peer spending. The bandwagon effect means families spend to match their social circle regardless of actual affordability. Income provides the illusion of safety while lifestyle inflation erodes any real margin.
What is the difference between 'squeezed' and 'pre-squeezed' spenders?
Squeezed spenders are lower-income earners genuinely forced to cut back. Pre-squeezed spenders are higher earners who continue overspending but unsustainably – they haven't hit the wall yet but the math doesn't work long-term.
How can families reduce holiday spending without feeling like Scrooge?
Propose family alternatives like Secret Santa, eliminate adult gifts entirely, gift experiences instead of items, set realistic budgets before shopping begins, and acknowledge existing debt as the first step toward change.
Why does Steve say 'money problems aren't about the money'?
Debt is math wrapped in emotion. The numbers are straightforward, but our relationship with money is tied to self-worth, relationships, and appearances. Holidays amplify this emotional component through gift-giving tied to love and belonging.
What is lifestyle creep and how does it affect high earners?
Lifestyle creep is the tendency for expenses to rise to meet income without intentional planning. Someone making $250,000 may struggle month to month because small, seemingly reasonable upgrades compound over time.
What is a Christmas Club savings strategy?
Take what you spent this year, divide by 12, and set up automatic transfers to a separate account. Modern apps like Acorns or digital envelope systems accomplish the same goal. When next December hits, you'll actually have the money.
