Oh hello, it’s me, The Holidays. What, are you surprised? I show up at the same time every year, steal all your booze, eat your food, and leave you penniless and hungover! You vowed to plan better last January, but you never got around to it, and now I’m back again.
Anyway, you’re probably wondering how to deal with me. Shouldn’t there be rules? Is there a formula to calculate a gift budget? Maybe you’ve spent around $100 per gift for your family members in years past, but now everything is more expensive and there are new kids and significant others in the mix. You need math!
In all seriousness, though, it’s tough to be proactive about the holiday season — especially this year, with so many shifts in the economy (inflation, lopsided wage growth). Where’s the line between appropriately celebratory and overdoing it? What’s the “right” amount to spend on a gift for your spouse? For your mom? For your co-workers? Below, some experts weigh in.
1. Look at your full financial landscape.
If you’re itching for an equation, the standard advice is to earmark 1 to 1.5 percent of your gross salary (total earnings, before deductions) for gifts, food, and travel for the holidays, says Stephanie Genkin, a certified financial planner based in Brooklyn. “But that’s more of a starting point than a one-size-fits-all rule,” she adds. “You need to examine your individual financial picture.”
For instance, if you earn $75,000 a year, this rule would have you spending $750 to $1,125 this holiday season. But if you don’t have that cash on hand — which, let’s be real, you probably don’t — that amount would push you into credit-card debt that you’d be carrying for several months at least. “If that’s the case, the gifts you buy would theoretically cost around 25 percent higher than the price tag because of the interest rate you’re paying on your credit card debt,” Genkin says. “Either way, that’s not a great option.”
2. Look back at this period in 2022.
See what you spent during these months last year. (Yes, I know this requires some digging through old bills and statements; I’ll wait.) A postmortem on your 2022 holiday spending might seem painful and tedious, but it’s a good way to predict what will happen again, says Genkin. Alternatively, bringing up those year-old expenses might make you realize that you really want to do things differently this time.
3. See what you can realistically spend.
The best way to calculate your holiday budget is to work backward from how much you’re willing to spend in total, says Meghan McCoy, a certified financial planner and professor of personal financial planning at Kansas State University. “My husband and I always sit down and look at what we can spend without going into debt,” she says. “Then we make a list of all the people we want to buy presents for and pick a price range per gift based on our budget.”
Always build in flexibility, McCoy adds. For example, if you have $600 to spend on presents for eight people, that allows for $60 to $75 per gift. Or, if you want to spend $200 on one person’s gift, that leaves roughly $50 to $60 for the remaining seven people. (Not to be a grinch, but you also want to factor in costs for holiday travel, random bottles of wine to bring to people’s holiday parties, and so on.)
4. Establish healthy (and professional) boundaries around gift-giving.
A couple of dos and don’ts: For colleagues and bosses, you really shouldn’t spend more than $20 to $30, tops — and before you do buy anything, check if there’s a company policy on gift giving. Another mistake to avoid is trying to match the price of whatever gift someone else gets for you, says Genkin. “You don’t know their financial circumstances, or if they’re making wise decisions in their spending,” says Genkin. Your only responsibilities are to (a) stick to your own budget and (b) express thoughtfulness. Plus, anyone who genuinely cares about you wouldn’t want to put you out over a holiday present.
5. Get creative with your gifting practices.
Be resourceful. Can you use credit-card points to buy gift cards? Encourage your family to do a secret santa or white elephant? Or, my personal favorite: Ask people what they want. It’s a surprisingly simple way to make your loved ones happy, and it often saves you time and money. With each passing year, we all accumulate more crap; for Christmas, I find myself wishing for a reverse Santa situation — someone who would come over and haul stuff away instead of bringing more. Recently, my family established a rule that we only put comestibles in our Christmas stockings. It’s great!
6. Remember: giving is (and should be) pleasurable.
Spending money on gifts or charity — known as “prosocial spending” — has real benefits. “Studies show that even when individuals are ‘forced’ to spend money on others, the respondents often report increased happiness,” says McCoy. “This suggests that the act of giving, whether voluntary or obligatory, can have positive effects on well-being.” So be generous, within reason, and remember: If you don’t manage things perfectly, there’s always next year.
This post has been updated.
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