Resist Black Friday’s siren song

Teresa Ghilarducci

THE December season of goodwill often turns into a January hangover of financial regret. As credit card debt soars, households should be ever-more determined to avoid overspending at the holidays. Armed with insights from behavioural economics, you can escape the giving season with a solid balance sheet.

The only way to beat the marketers is to see through their gimmicks: the bonus, the urgency, and the ease of purchase. Seeing those techniques for what they are can help shoppers avoid promotional sales like Black Friday; make fewer online purchases; and put off buying things for themselves. Instead, create mutual accountability by enlisting family and friends to limit gift arms races.

Don’t be drawn into deep discounts

The structure of the sales are highly choreographed events by marketers who know how to exploit the brain’s reward systems. By dangling a reward – the “huge” savings between the actual price and the sale price – and creating urgency with a time limit, marketers encourage impulse buys.

Avoid retail therapy

Over half of holiday shoppers admit to also buying gifts for themselves. Yes, while you are looking for Charlie’s present, you might find something for yourself. I get it. Combine the ease of online shopping, a glass of wine, and the stress of the season and sellers have consumers right where they want them. Add to cart. The problem is that by shopping sales and getting drawn into promotions, you may be buying more than you expected.

Instead, make note of what you want, but wait. Big-ticket items are usually also discounted in January and February – and the passage of time will help you discern quality and compare prices. Retail therapy is especially tempting when you’re feeling down, and lots of people feel down during the forced jollity of the holiday season. Advertisers know it. To beat the system, make a game of noting all the ads promising buyers that spending will somehow reward the shopper and boost their mood.

A little friendly peer pressure can also help you refrain from overspending. Every holiday season, I have the same conversation with friends and family: How can we limit the gifts and the circle of gift givers? Without an agreement, the spending escalates as the presents get more expensive, more numerous, and the people greater in number.  It becomes a Yuletide arms race. Almost everyone I know wishes the circle was smaller and the gifts were cheaper. And almost everyone doesn’t want to be the first to impose it.

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A successful arms agreement is fun; considers community; and people don’t break it. For example, you might draw names and buy one gift for one person; to make it work, agree on a spending limit for the one gift.

I know all too well how hard limiting gifts can be. One year, my sister-in-law told us that only the children could receive presents and the adults would instead do a “white elephant” game. The game was hilarious – we each wrapped a secret gift and then engaged in a round of steals and trades. But over the years, it escalated – first to little stocking stuffers; then to debating if a 25-year-old was still a kid; and then the white elephants became seriously expensive presents. We realised it was time to draw up a new “arms agreement.”

Lots of people enjoy the holidays because looking for and finding the perfect gift for someone you love is joyous. If you can resist impulse buys by avoiding the frenzy of promotional sales and retail therapy, and manage the expectations of your friends and family, you can enjoy feeling generous while also making sure your household makes it to 2023 happier and more solvent. BLOOMBERG

Teresa Ghilarducci is the Schwartz Professor of Economics at the New School for Social Research.