How much money should I spend on the holidays?
Photo illustration: by The Cut; Photos: Getty Images
Oh hello, it’s me, The Holidays. What are you surprised? I show up at the same time every year, steal all your alcohol, eat your food, and leave you penniless and hungover! You vowed to plan better last January but 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 for calculating a gift budget? Maybe you spent around $100 per gift for your family members in previous years, but now everything is more expensive And There are new children and significant others in the mix. You need math!
Seriously, it’s hard to plan ahead for the holidays – especially this year with so many changes in the economy (inflation, lopsided wage growth). Where is the line between appropriate celebration and overdoing it? What is the “right” amount to spend on a gift for your spouse? For your mother? For your colleagues? Some experts comment below.
1. Look at your entire financial landscape.
For example, if you make $75,000 a year, this rule would require you to spend $750 to $1,125 this holiday season. But if you don’t have the cash on hand – which, let’s be honest, you probably don’t – that amount would send you into credit card debt that you’d carry for at least several months. “If that’s the case, the gifts you buy would theoretically cost about 25 percent more than the actual price because of the interest rate you’re paying on your credit card debt,” says Genkin. “Either way, this isn’t a good option.”
2. Look back at this time in 2022.
See what you spent during these months last Year. (Yes, I know, that requires a bit of digging through old bills and bank statements; I’ll wait.) A post-mortem of your 2022 holiday spending may seem painful and tedious, but it’s a good way to predict what will happen again, says Genkin. As you bring up one year’s expenses, you may realize that you really want to do things differently this time.
3. See what you can realistically spend.
The best way to calculate your vacation budget is to work backwards from how much you’re willing to spend overall, says Meghan McCoy, a certified financial planner and professor of personal financial planning at Kansas State University. “My husband and I always sit together and see what we can spend without going into debt,” she says. “We then make a list of everyone we want to buy gifts for and choose a price range per gift based on our budget.”
Always build in flexibility, adds McCoy. For example, if you have $600 to spend on gifts for eight people, that’s $60 to $75 per gift. Or if you want to spend $200 on one person’s gift, that leaves about $50 to $60 for the remaining seven people. (I don’t mean to be nitpicking, but you should also factor in the cost of vacation trips, random bottles of wine you bring to holiday parties, etc.)
4. Set healthy (and professional) boundaries when giving gifts.
A few dos and don’ts: For colleagues and superiors, you Actually, you shouldn’t spend more than $20 to $30, tops – and before you buy anything, check to see if there is a company policy on gifting. Another mistake to avoid is trying to match the price of the gift someone else is getting for you, says Genkin. “You don’t know their financial circumstances and whether they’re making smart spending decisions,” Genkin says. Your only responsibility is to (a) stick to your own budget and (b) show consideration. And those who really care about you don’t want to bother you with a Christmas present.
5. Get creative with your gifting practices.
Be resourceful. Can you buy gift cards with credit card points? Do you encourage your family to make a secret Santa or a white elephant? Or my personal favorite: Ask people what they want. It’s a surprisingly easy way to please your loved ones, and it often saves you time And Money. With each passing year we all accumulate more crap; For Christmas I want the opposite Christmas situation – someone who will come over and carry things away instead of bringing more. Recently my family adopted a rule that we only put food in our Christmas stockings. It is great!
6. Remember: Giving is (and should be) joyful.
Spending money on gifts or charities – known as “prosocial spending” – has real benefits. “Studies show that even when individuals are “forced” to spend money on others, respondents often report increased feelings of happiness,” says McCoy. “This suggests that the act of giving, whether voluntary or compulsory, can have positive effects on well-being.” So be generous within reason and remember: if you don’t get things perfect, there’s always next year.
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