Holiday shopping: The curse of coupons and sales

Using coupons and shopping for sales are a recipe for economic ruin. Those who employed these tactics to save money were far more likely to overspend during the holidays than those who didn't, according to a new report.

A survey of more than 1,000 consumers found that less than one-third who didn't bother with coupons overspent, but more than 40 percent who did use coupons spent more than they planned on holiday shopping, according to Elevate's Center for the New Middle Class, which sponsored the study.

The results were nearly identical when it came to shopping for sales. Consumers who said they waited for sales promotions to control their holiday spending were 50 percent more likely to say they overspent than those who didn't.

"Realize that retailers have done this for a long time, and they may know something about how to open our wallets," said Jonathan Walker, executive director of the Center for the New Middle Class. "There is something about the feeling that we've saved money that gives us license to spend more."

Two groups of spenders

Notably, planned expenses are pretty high for the holidays even before consumers engage in budget-busting. The study broke consumers into two groups based on their credit scores -- "prime" consumers with credit scores over 700, and everyone else. It then asked how much individuals planned to spend during the holiday season. Those who put themselves on strict spending budgets and could thus predict their spending said they'd budgeted between $658 and $1,182.

But when all respondents were asked to break out how much they actually did spend last year on gifts, travel, parties, meals, charity and decorations, the numbers were far different. The "prime" consumers, who have credit scores above 700, said they actually spent a whopping $1,702, including $770 on gifts and $435 on holiday travel. The "nonprime" consumers spent considerably less, but still a healthy $988 on average. Roughly one-third of all consumers spent more than they had planned.

Part of the problem may be that people forget the myriad of extraordinary costs that crop up during the season, from travel to additional charitable gifts, Walker said. This may be why the survey found that people who made gifts by hand and budgeted for each gift purchase weren't effective in stopping overspending. He suspects they forgot that only about 60 percent of holiday costs are for gifts. Decorations, travel and parties need to be accounted for, too.

However, holiday overspending wasn't the only Yuletide budget-buster. More than half of survey respondents said some unusual expense -- a car or appliance repair, a medical problem or veterinary bill, an unexpected high utility bill -- hit them from out of the blue last holiday season.

"Car problems don't take two months off just because you're buying gifts," Walker said. "You've got to have some money in reserve for the things that you wouldn't expect."

Have a budget, and stick to it

The result of budget-busting was a big boost in average post-holiday debt for about one-third of the nonprime consumers and for roughly 20 percent of the prime group.

The one bright note: Individuals who put themselves on a strict overall budget were far less likely to overspend. Only about one-quarter of the nonprime and 30 percent of the prime consumers who had budgeted spent more than they planned. The budgeters were also more likely to say they ended up better off financially after the holidays than they were before, Walker said.

"We were trying to see what techniques people employed to avoid overspending and whether they worked," he said. "Having a strict budget was the only effective method."