For most families, spending gets out of control at Christmas time, and your spirit of generosity can quickly turn into a wallet-stealing poltergeist if you’re not careful.
All sorts of fun gadgets are justified in the month of December, from brand new computers, to cell phones and even new cars. Not to mention all the small ticket presents for the kids that add up to unbelievable figures. In 2017, Americans planned to spend $967.13 on average for Christmas gifts, including $330 on their children ($132 per kid on average) — and that’s just for gifts. Add party supplies, food, decorations, and the new trend of “self-gifting” onto that, and Americans are dropping some serious coin on a single holiday. According to a Coinstar survey from the same year, 77% of consumers expected to go over-budget.
The time of year when it’s hardest to control your spending is the exact time that self-restraint pays off, though. If $967.13 were your principal, to which you added about $80 a month (Christmas budget/12) and you let it compound at 7% for ten years, you’d end up with $15,950.99. Obviously you’re not going to eliminate your entire Christmas budget, but that should put things in perspective. What if you only spent half the average Christmas budget ($483.56)? You’d end up with $7,976.35 after a decade. That’s the price of a pretty nice car every ten years.
It’s important to think beyond Christmas day and weigh which things are worth your money. A few days after Christmas (or perhaps the day after), your happiness will level out. Unless you got something very useful (which should always be your aim for Christmas presents), Christmas is just a really expensive endorphin rush.
Much of the waste comes from children’s toys. Retailers stock their shelves with cheap, annoying, breakable plastic toys based on Disney characters and the like because every year, consumers think, “Oh, how cute! That’s her favorite show!” or “Elsa is her favorite!” and scoop up a bunch of tacky and boring branded merchandise to stuff under the Christmas tree. So here’s some advice for a less budget-busting Christmas that your kids won’t totally hate you for:
Don’t give them animatronic animals, branded dolls, or cheaply made instruments they aren’t keenly interested in learning how to play. Young kids, under age 7, don’t need fancy toys based off their favorite TV shows to have a good time. Imagination fuels their play, and the cardboard box their new toy came in can give them as much joy as the toy itself. After a couple weeks, the new toys will be piled in various corners of the house, abandoned. Giving like this means every few years will necessitate a garage sale to get rid of what is now classified as “junk.”
So how can you reign in costs and optimize your giving? Here are five suggestions:
1) For adults, simply do a drawing-based gift exchange instead of getting gifts for every adult in the family. Set a limit and try not to go over. $50-$75 should allow you to buy a quality item the other person will really enjoy. I personally focus on “buy it for life” items that are either known for their longevity or come with a lifetime warranty.
2) Do the same thing for your siblings’ kids. As families grow and nieces and nephews start to outnumber the stars, buying every kid a present can really add up. So start a mini-exchange for the kiddos with a lower limit like $25. If you have 20 nieces and nephews and 2 kids, this will limit spending to $50.
3) Get creative with stocking stuffers. They don’t need to be expensive – most of us are just looking forward to some good candy. Besides chocolate oranges and Lindor truffles, we also stuff stockings with little everyday items, like socks, lotion and hand sanitizer, that usually come out of our grocery and clothes budget. If they’re in a stocking they can be a more luxurious than if you bought a comparable item as part of your regular budget. So if you know you’re going to buy socks for your spouse soon anyways, go ahead and get them now to fill in the stocking space.
4) For adults, focus on practicality. For kids, focus on fun and development. My wife and I typically get each other a $100 item. Expensive, yes, but we always make sure the gift is practical. In the past, gifts have included luggage with a lifetime warranty, a sous vide, high quality shoes, an Instant Pot, etc. Most of the gifts we give each other are things we likely would’ve purchased in the future at a lower price and quality level. Christmas allows us to get the same type of thing at a higher quality. For kids, give them tools to be creative (crayons, washable paints, pottery wheels, window art kits) or games and puzzles, which encourage cooperation, critical thinking, and present a challenge. Give things that keep them active, like a Croquet set or a Slip N Slide they can use when the weather warms up—this will also encourage delayed gratification, and it’ll be less expensive as an off-season purchase.
5) Make a budget and stick to it. We recommend spending $50 per child and setting aside $25 for their gift exchange with cousins. For spouses, $100 each will allow for a high-quality item that will last for years if not decades. Stockings should be limited to $25/person, but you can spend over that if you “steal” from other budgeted areas like clothing and groceries. Lastly, $75 for the adult gift exchange. So if you’re married with 2 kids, this equates to $600.
Overall, Christmas shouldn’t have to be a financial stressor if your intentional with your spending. Go in with a plan, make sure you’re on the same page as the rest of your family and stick to your budget. Doing this will set you up for a great new year.