Invest or Pay Down Debt? Plus How to Save Big This Holiday Season

0:00Sean Pyles:The following is a paid sponsorship, not an endorsement by NerdWallet's editorial team. Today's episode is sponsored by Bilt.

0:06Elizabeth Ayoola:You've heard me talk about Bilt as the loyalty program that lets you earn points on rent wherever you live, and they just leveled up even more. As of 2026, renters and homeowners can also earn up to 1.25x points on their housing payments.

0:23Sean Pyles:This is thanks to Bilt's three new credit cards, the Palladium Card, Obsidian Card, and Blue Card. All three can turn your housing payments, rent, or mortgage into flexible rewards. So you can choose the card that fits your lifestyle without missing out on points and exclusive benefits.

0:38Elizabeth Ayoola:Built points can be redeemed at top airlines and hotels, Amazon.com purchases, future rent payments, and so much more. Built points have also been ranked by top publications as the industry's most valuable point currency.

0:52Sean Pyles:Your housing payment is most likely your biggest expense. Make it your most rewarding. Find the card that fits your lifestyle and apply today at joinbuilt.com slash smartmoney. That's J-O-I-N-B-I-L-T dot com slash smartmoney. Make sure to use our URL so they know we sent you. Terms and limitations apply.

1:11Elizabeth Ayoola:Subject to approval and eligibility, Built cards are issued by Column N-A, member FDIC pursuant to license from MasterCard International Incorporated. This episode is brought to you by Google Chrome. You think you know a browser, but Gemini and Chrome? That's new. It can help you with practically anything on the web, like restoring a vintage motorcycle from a 50-page restoration block, or finally break down that long article you've had open for weeks. Gemini and Chrome is here for it. Ready to make anything online make sense? There's no place like Chrome. Check responses set up required, compatibility and availability varies 18+.

1:48Sean Pyles:We talk a lot about budgeting on smart money, and if there's one time of year you really want to budget for, it's the holiday season. Do you have your Santa savings lined up yet?

2:03Sean Pyles:Welcome to NerdWallet's Smart Money Podcast, where you send us your money questions and we answer them with the help of our genius nerds. I'm Sean Piles.

2:10Elizabeth Ayoola:And I'm Elizabeth Ayola. Later this episode, we'll have a lightning round of your questions, and those questions include whether to pay off a mortgage or use that money to invest, and an explanation of ETFs. But first of all, our weekly money news roundup, where we break down the latest in the world of finance to help you be smarter with your money. Our news colleague, Anahil Hosky, is back, back, back to talk holiday spending. Yeah, I don't really know how to happen, but I guess holiday shopping season is upon us once again. While that's pretty horrifying to me, there's a much scarier thing happening right now.

2:45Now, this year's coming with a big challenge that shoppers weren't facing last year, and that's tariffs pushing up prices on top of some persistent inflation that we've been seeing for a while now. Now, there was a new report from the St. Louis Fed that showed that prices for things like furniture, musical instruments, jewelry, household goods, and all kinds of vehicles have already increased due to pass-through effects of tariffs. And that all means that shoppers may see higher prices across a variety of products this holiday season. Now, NerdWallet's 2025 holiday spending report shows that people are already feeling the squeeze, and it's also changing their shopping choices.

3:23So we have Erin Elisa, a data writer here at NerdWallet, to talk more about the findings of that study. Erin, welcome back to Smart Money. Thanks for having me back. Every year we talk about holiday spending stress, but this year's data feels a little bit different. What surprised you the most? Americans are very consistent when it comes to the holidays. We do this report every year, and we rarely see much change in the percentage of Americans that plan to buy gifts and the percentage that plan to travel. That said, this year we're seeing holiday shoppers plan to spend$182 more on gifts this year compared to last year, and that's about a 20 % jump.

3:57What's behind that increase? So the data doesn't tell us specifically how holiday shoppers arrived at their estimated gift cost numbers. But it does tell us that about two-thirds are concerned about tariffs impacting their holiday shopping. So it's likely they're baking some extra cash into that budget to cover potential price hikes. So nearly one in five holiday shoppers say they don't even know how much to budget for gifts this year because of those price increases. And how does that uncertainty around tariffs and their impact on prices affecting people's spending decisions? So most holiday shoppers expect tariffs to impact their shopping.

4:32So for some, it's going to impact when they shop. 28 % of holiday shoppers this year say they'd shop earlier than usual to avoid potential product shortages caused by those tariffs. For others, it could impact who they buy for and how much they spend. So 24 % of holiday shoppers say they'd buy fewer gifts this year, and one in five say they'd buy for fewer people this year due to the price increases. Let's talk about what happens after the shopping, and that's debt. Now, the report found that a third of shoppers still haven't paid off their 2024 holiday debt. Then the study also found that 15 % of shoppers plan to spend more than they can comfortably afford.

5:10It does seem like shoppers can get into a bad cycle that's really hard to stop. One in 10 holiday shoppers this year actually say they're in debt for multiple years of buying holiday gifts. So, you know, gift giving is a want, not a need. But depending on your traditions with your loved ones, it may feel compulsory. or you may just love giving gifts, but you're digging yourself into a hole in the meantime. That causes a lot of stress and more than half of shoppers, according to the reports, say that holiday spending does stress them out. What's your advice for minimizing that kind of stress? So I don't know about you, but for me, the holiday season is fun.

5:46It's supposed to be fun. You get time with loved ones, good food, and gifts if that's part of your tradition. So if it's not fun, it's probably time to change things up. According to the survey, nearly two-thirds of Americans say they'd like their family's holiday traditions to be less focused around gifts than they are. But just one in five of these shoppers say that they've discussed or plan to discuss limiting holiday gift spending this year with their loved ones. So if you're feeling stressed about holiday spending, you probably aren't alone, even in your circle of friends and family. So being the brave one and saying something, it could be a great step in the right direction.

6:24There's no reason to continue on with holiday traditions if it's hurting you or your loved ones financially. Right. You can't change your family necessarily, but you could change your gift-giving dynamics. So between tariffs, buy now, pay later, debt, and rising costs, are we seeing any signs that shoppers are changing their approach about holiday spending? So in addition to the changes in approach we discussed earlier with tariffs, like buying fewer gifts or gifts for fewer people, Some holiday shoppers are opting to buy more experienced gifts to avoid the tariff-related price hikes on products.

6:56And some say they'll give smaller holiday tips and bonuses to service and care workers this holiday season to save money. And what are shoppers planning to do to keep their costs down? What trends are emerging? Sales days are always a big one. Black Friday, Cyber Monday, Small Business Saturday, we always see those on the list. But new to our survey this year is using AI to plan holiday gift shopping. So 14 % of 2025 holiday shoppers plan to use tools like ChatGPT to do that planning. I guess for your hard-to-shop-for people, that might be a little bit more helpful than just using your own brain.

7:29But we should always remember to use our own brains. Now, shopping for gifts aren't the only cost stresses around the holidays. The study is also looking at travel and found that Americans are planning to spend over$300 billion on flights and hotels. Now, similar to holiday shopping debt, the report found that nearly a third of holiday travelers are still paying off that 2024 travel debt. Can you elaborate a little bit on that? For the purposes of this report, we count flights and hotel stays during the holiday season as holiday travel. So those Americans are still paying off transportation and lodging, but they could also be shouldering other holiday costs from last year, travel-related or otherwise.

8:07And like with the 10 % of holiday shoppers that have debt for multiple years, 17 % of holiday travelers say they have holiday travel debt for multiple years. What are some of the ways that people can save? The report found that 91 % of travelers are trying to take steps to do so. So some are pretty basic. So flying on a non-peak day is a big one. If work and school schedules allow, you could opt to stay with loved ones instead of getting a pricey hotel room with those holiday rates. but a big one we recommend is using your travel points and miles if you have them. Some people want to kind of hoard them and save them up for the perfect trip, but since points and miles can lose their value over time, it's probably best to use them when you can if you don't have another trip coming up really soon.

8:51All right, Erin, we covered a lot of ground today. What's one takeaway that you hope listeners remember from this year's report? I say it every year, and I will continue to say it until no one has lingering holiday credit card debt. Save year-round for your holiday expenses. It happens the same time every year. Use the preceding 11 months to prepare for the costs. Thank you so much, Aaron. Thanks, Ana.

9:12Sean Pyles:And thank you, Ana. Also, a friendly reminder that you can set up and manage your budget in the free NerdWallet app for Android and iOS. You can use it to track your finances and current expenses across key categories in one place, along with a lot of other features to help you take control of your spending. We'll include a link to download it in today's episode description.

9:31Elizabeth Ayoola:Up next, we've got a lightning round of your questions. But before we get into that, a reminder to send us more of them. We want more and more and more questions. Maybe you want to put your holiday spending on a new travel credit card to earn a sign-up bonus, but you want help finding the right one. Or you need some help wrapping up the financial goals you set at the beginning of the year.

9:52Sean Pyles:Whatever your money question, leave us a voicemail or text us on the nerd hotline at 901-730-6373. That's 901-730-NERD. Or email us at podcast at nerdwallet.com.

10:03Elizabeth Ayoola:In a moment, this episode's money question. Stay with us.

10:08Sean Pyles:The following is a paid sponsorship, not an endorsement by NerdWallet's editorial team. Today's episode is sponsored by Bilt.

10:15Elizabeth Ayoola:You've heard me talk about Bilt as the loyalty program that lets you earn points on rent wherever you live. And they just leveled up even more. As of 2026, renters and homeowners can also earn up to 1.25x points on their housing payments.

10:32Sean Pyles:This is thanks to Built's three new credit cards, the Palladium card, Obsidian card, and Blue card. All three can turn your housing payments, rent, or mortgage into flexible rewards. So you can choose the card that fits your lifestyle without missing out on points and exclusive benefits.

10:46Elizabeth Ayoola:Built Points can be redeemed at top airlines and hotels, Amazon.com purchases, future rent payments, and so much more. Built Points have also been ranked by top publications as the industry's most valuable point currency.

11:01Sean Pyles:Your housing payment is most likely your biggest expense. Make it your most rewarding. Find the card that fits your lifestyle and apply today at joinbuilt.com slash smartmoney. That's J-O-I-N-B-I-L-T dot com slash smartmoney. Make sure to use our URL so they know we sent you. Terms and limitations apply.

11:20Elizabeth Ayoola:Subject to approval and eligibility. Built cards are issued by Column N.A., member FDIC, pursuant to license for MasterCard International Incorporated.

11:31Sean Pyles:Today's episode is sponsored by Rula. Finding a therapist is hard enough, but finding one that actually takes your insurance, that's where most online therapy platforms fall short. Many don't work with insurance at all, which means you're stuck paying the full cost out of pocket or paying for an expensive monthly subscription.

11:48Elizabeth Ayoola:Rula does things differently. They partner with over 100 insurance plans, making the average copay just$15 per session. That's real therapy from licensed professionals at a price that actually makes sense. Think about it. You use your insurance benefits to maintain your physical health, so why wouldn't you do the same for your mental health?

12:08Sean Pyles:Rula isn't just affordable, the experience is tailored around you. Other online therapy platforms might match you with the first available provider, whether or not they're the right fit. Rula considers your goals, preferences, and background to provide you a curated list of licensed in-network therapists who are actually aligned with what you need, because they know that finding the right therapist can make all the difference. Go to rula.com slash smart money to get started today. That's rula.com slash smart money for quality therapy that's covered by insurance.

12:36Elizabeth Ayoola:Thousands of people are already using Rula to get affordable, high-quality therapy that's actually covered by insurance. Visit Rula.com slash smartmoney to get started. That's R-U-L-A dot com slash smartmoney. You deserve mental health care that works with you, not against your budget. We're back and answering your money questions to help you make smarter financial decisions. This episode's question comes from several listeners because guess what? But we're doing a lightning round. Cue the cheers. Come on, Sean. Woo!

13:10Sean Pyles:Is that enough cheering?

13:11Elizabeth Ayoola:Yeah, good job.

13:13Sean Pyles:All right. During lightning rounds, we answer several questions from our listeners. This time around, Elizabeth and I are taking them on ourselves. And I'll kick us off with the first question. It's from a listener's text. Here we go. I'm a 33-year-old single male living in Boulder County, Colorado. I'm a seasonal worker, ski instruction, and work various other jobs in the off-season. I've been trying to get year-round work in my industry, but for now, I'm not sure whether it's going to happen anytime soon. This means my income is pretty spontaneous. It can range from$40 ,000 to$80 ,000 a year.

13:44Sean Pyles:My question is whether it makes sense to focus on paying my mortgage off at a 5.069 % interest rate, or use my extra savings to invest in ETFs like SPY and XLK, or maybe a combination of both. I also want to rent out my condo when I'm away for the winters, and I heard that I could write off my mortgage while I'm renting it out. It seems like there are just so many variables. I'm not sure what is the best move to make. Additionally, my mortgage is for approximately$130 ,000, whereas my property value is roughly$270 ,000. Thanks.

14:15Elizabeth Ayoola:First of all, it sounds like the listener has some equity in the home, about$140 ,000. They also have a decent interest rate of 5.069%, considering current rates are around 5.9 % or higher for 30-year fixed mortgages. Now, the listener is relatively young, but we don't know how many years they have left to pay their mortgage off. We don't know the bigger picture for their financial goals either. We also don't know their investing goals and when they need the money. Now, a common financial principle, however, is to compare the guaranteed return of paying off debt to the potential return of investing.

14:49Sean Pyles:And we can use the concept of opportunity cost to answer the question at a high level. Opportunity cost is the potential benefits or profit you forfeit by choosing one option over another. In this case, it's looking at what the listener would potentially miss out on if they chose paying off the mortgage over investing and vice versa.