Ah, Christmas ~ it's the most wonderful time of the year ~ the time for giving and sharing gifts with family and friends. It's a season all wrapped up with celebration and good cheer, so why is it that so many of us begin the month of December feeling jolly and festive only to end the holiday feeling financially strained? Could the best present we give this year be to ourselves, in the form of no scary credit card bill in January?
According to a Gallup poll conducted in October 2011, the average shopper plans to spend $712 on Christmas gifts this year. Nearly one-quarter of the people polled said they plan to spend at least $1,000 on gifts, another quarter say they will spend between $500-$999, while one-third predict they will spend between $100 and $499. Very few of those contacted plan to spend less than $100, while 14 percent were unsure. Compare this to what people should be spending at Christmas . Conventional wisdom holds that the average person can typically afford to spend one percent of their income on presents. The average family earns about $63,000 per year and can afford to spend $630 on gifts. The Gallup poll estimate of $712 per family shows that on average, the typical family will overspend by 13 percent.
It is clear from the statistics that this time of year, we spend more money that we can afford on our family and friends. We tend to do this naturally, despite the reality that overspending on Christmas presents impacts our financial picture well into the next year. We do this in part because we confuse want with need, the desire to bring joy to others temporarily outweighs our desire to be good to ourselves. The question isn't what you want to give because we all want our loved ones to have it all. The question is, what you can afford to spend.
The right amount to spend is what you can spend today, without compromising your own needs, or the needs of your family. Bottom line: only buy gifts that you can immediately pay for. This means no credit card balances carrying into next year. It may seem like a daunting task, especially when you are accustomed to giving big this time of year. Your heartstrings will tug when you look at your children's letters to Santa and realize you won't be able to get everyone everything they want. But in this tough economy, it is more important to stay focused on long term financial goals than to get side tracked by the short term good feelings of splurging on Christmas presents.
Prepare yourself for Christmas shopping before you head to the mall or click on the computer. Make a list of who you are going to buy a gift for. This task will help you focus on the scope of shopping you need to do. Most of our lists start with immediate family and close friends, but be sure to remember your neighbors, teachers and office gift exchanges, too.
As you make your list of people to buy for, consider a few potential ideas for each person. You may have the perfect present in mind ,but even if you have just an outline of what might make a good present, this will help you while you're searching for gifts.
Once you have an outline of who you need to buy for, you can now begin making a budget. Sit down and realistically calculate what you can comfortably spend on Christmas presents. Your budget represents the amount of money you will allow yourself to spend. Do research online and scan sales ads to ensure your budget is practical, then adjust your figures accordingly. If one item for a person with multiple ideas is clearly a budget buster, make the choice to get a less expensive item or cut back somewhere else.
When you are shopping, keep your list and budget in hand. This will help you to resist the offers and promotions that may tempt you. Impulse shopping is difficult to pass up, which is why retailers will pull out all the stops to get your attention. A list will acts like blinders, keeping you on the right path.
Constantly review your actual spending against your budget. For each item you purchase, update your budget. If you find you have overspent on one item, you will need to lower the spending on other items to make up the difference. On the other hand, if you save money on some items, this can free you up to spend more on other gifts. Keep this practice up during all of your Christmas shopping and you will be able to track your spending and stay on budget.
These suggestions will make a real difference in your enjoyment during the holiday season and beyond. This year, make a vow to be as good to yourself as you are to your loved ones. Take the time to prepare for Christmas shopping armed with a list of who to buy for and a realistic budget to match. Here's to making overspending on Christmas presents a ghost of Christmas past!