$anta Clau$ is Coming to Town

How much should I spend on Christmas gifts this year?

Written by Tami Acree

I’ve seen many a friend post on social media something to the tune of, “Goodbye Halloween, Hello Christmas!” as they set up their Christmas trees and deck their halls with boughs of holly the first week of November. I happen to be a post-Thanksgiving Christmas decorator, but wherever you may fall on the when-to-decorate spectrum, the truth remains: Christmas is swiftly approaching! 

Christmas for the average American family is an expensive time of the year. World Atlas ranked the globe by percentage of monthly income spent on Christmas, and America tied with the United Kingdom for third overall at 15%. This includes spending on all the different aspects of Christmas – decorations, outings, hosting friends and family, and gifts. In this blog I will primarily focus on the portion of your Christmas spending allocated specifically to gifts and answering the question, “How much should I spend on Christmas presents?”

Here are some of the tips I apply to the gift-giving season:

• Pick a number. How much can you afford to spend on Christmas gifts? Your number is based on your financial situation alone. If you already have an annual budget that includes gifts, you can use whatever is left from what you budgeted for giving in 2020. Don’t have a budget and don’t know where to start? The Consumer Expenditure Survey estimates that the average American family spends about 1% of their annual take-home pay on Christmas gifts. Take-home pay is what is left after everything else comes out of your salary: taxes, health insurance premiums, retirement contributions, etc. So, a family bringing home $5,000 per month might spend about $600 on Christmas gifts. Just because 1% is the average doesn’t mean that’s what you should do; it just might be a good starting point. Comparing your Christmas budget to others’ is a surefire path to discontentment. Your ultimate decision of how much you can spend on Christmas should be free of the contamination of comparison.

• Divvy up your spending ahead of time. Make a list of each person you will be purchasing a gift for this year. This includes your family, friends, your kids’ teachers, your small group, etc. Next to each name, determine the limit of what you are willing to spend on each one. If you add all the spending together and that number fits in your budget, excellent! If you choke on your hot chocolate when you see that total, you may need to make some adjustments to your list or get creative. I happen to have two parents, five siblings, four in-laws, and 15 nieces and nephews just on my side of the family! Back when there weren’t quite so many heads, I used to buy a present for each one. But the day came when I choked at the grand total and had to change my strategy. Now we either buy a “family gift” (something that all of the kids in the family will enjoy), or we play a game at Christmas where the winner gets $20 and all the losers get a box of candy, or we pick names and do Secret Santa. There are lots of creative options that will let someone know you are thinking about them at Christmas without spending a ton of money. Failing to plan-ahead is an easy way to let Christmas spending get out of hand. Spur-of-the-moment gift giving is fun, but if that happens for everyone in your life you will have a big bill to pay.

• Buy with a purpose. Black Friday and Cyber Monday can be great resources if you know what you’re looking for on those dates. This year, because of COVID-19, many stores are extending Black Friday to the entire month of November. I know a lot of savvy shoppers who have most of their gifts purchased by the beginning of December and save money doing it thanks to all the end-of-November deals. I make my mom a custom calendar every year with family pictures from the previous year. If I have it done in time, I can wait for the site to do 60% or 70% off promos and then order. You can also save money in shipping fees from online purchases by purchasing early. Having the bulk of your shopping done early is a huge stress-reliever as well.

• Practice self-control. At the end of the day, if you won’t be able to pay your credit card bill in January, the gift isn’t worth it. I guarantee your loved ones would rather you be financially secure than receive the sweater you might give them. Carrying a balance on a credit card is one of the most expensive things you can do. What’s the good of getting a gift 20% off on Black Friday if you’re going to be charged 23% interest on your credit card balance for the next several months?

If you can’t afford an expensive Christmas, there are alternative ways to show love other than spending money on gifts. Giving gifts is only one of five love languages. Appeal to your gift recipient’s highest love language. Write them a letter (words of affirmation). Plan a fun afternoon with the person one-on-one (quality time). Offer your services helping them do a task they find particularly taxing (acts of service). 

Please don’t hear me inspiring you to be stingy and ungenerous this holiday season. The reason for the season is generosity! God gave us the most priceless gift, His Son, to be born on Christmas Day. This time of year awakens generosity in humanity like no other time and it is a beautiful thing. As a financial advisor, I think you can be generous and responsible at the same time, and we will always encourage you to be both.