Christmas is the most wonderful time of the year.
At least that’s how I feel about it, just ask my wife. I try to start the Christmas music come the first of October, which she is not a fan of 🙂
Christmas should be a time of joy to celebrate with friends and family. But unfortunately, our consumerist culture has turned it into a huge spectacle to see who can spend the most money on who.
And all too often we’re buying gifts for people we don’t even want to buy for.
Now granted, not all of the spending is out of obligation. Many people that we buy gifts for are people we actually want to give to.
But the problem is that spending has become an epidemic for this country. And if you’re used to shelling out tons for the holidays, you may want to re-think your plans.
We Simply Can’t Afford Christmas Shopping
Okay, here’s the deal.
Americans spent $600 Billion on Christmas shopping in 2013. These winter sales, account for 20% of total annual retail sales.
Right now the average American is projected to spend $830 on Christmas gifts this year (2015).
The median household income in America is currently $53,657.
And the average household owes $7,529 in credit card debt.
But if you exclude households who owe $0.00 in credit card debt and only include those carrying a balance, the average credit card debt rises to $16,140. <— Did you get that? This doesn’t include cars or student loans. Just credit cards.
This means that on average Americans owe 14% of their income in consumer credit card debt! Can you say #mindblown
And at $53,000 per year the average monthly take home pay is $4,417 before taxes. Therefore, Americans are spending 18% of their December income on Christmas shopping while owing almost 2 months income in credit card debt!
Logically, this means that the majority of people are going into more credit card debt for Christmas shopping. Then they spend the rest of the year trying to pay off the credit card in time for the next Christmas.
People simply can’t pay cash for their Christmas shopping so they run up the credit card debt because they’re supposed to buy all those gifts.
And if you can’t pay cash, then you can’t afford it.
Even if You Can, Doesn’t Mean You Should
While the majority of people don’t have adequate savings to justify their high Christmas spending, some people do.
But what if you can afford it, and it really isn’t a big deal to spend a lot on the holidays, should you?
Even if you can afford to drop a lot of money on Christmas gifts you should ask yourself what your overall goal is.
Why are you spending the amount your spending? Is is because you feel obligated to spend a certain amount on someone?
Or maybe you feel like you need to spend at least that much in order to get a valuable gift.
Perhaps you think that it really does represent how much you care for that person and so you want to get a lot.
Or maybe you truly just want to spend a lot because you really love the person you’re buying for.
Although you may have a great reason for buying extravagant gifts or for lots of people, there are a few reasons why you may want to dial back. When you give expensive gifts it can have a few side-effects.
1. You’re extravagant giving may make the receiver feel bad about what they can give. If you give your sister a $200 pair of boots, but she can only afford to give you a $20 gift card to Starbucks, you’re going to make her feel like crap. Give gifts at the level that the receiver can reciprocate. You don’t want to remind them how much more money you have than they do. And also keep in mind the relationship. If it’s sibling to sibling or friend to friend you definitely don’t want to obviously spend more than they can.
2. You raise the expectation for the receiver and it makes them appreciate the gifts less. Have you ever noticed how spoiled children expect tons of gifts for Christmas and yet they don’t really appreciate them? How many times have you given a gift to your child, nephew or cousin and they really weren’t all that thrilled? It’s probably because they had 20 other new toys to play with. We need to create a lower expectation when it comes to gifts so that we can learn to truly appreciate a gift when we get it. Kristen at the Frugal Girl wrote a great post on how to dial back your children’s expectations for Christmas gifts if you want to check it out.
3. Expensive doesn’t necessarily mean higher value. Often times people would prefer meaningful gifts that they actually want rather than just something expensive. For instance, instead of buying your mom a super nice necklace, maybe give her a homemade “certificate” saying you will take her out to lunch at her favorite restaurant. This would be less than $30 – $40 and I guarantee would be more valuable to her.
So now you’re convinced that whether you can afford it or not, you should likely dial back your Christmas spending.
Mark Off Some People On Your List
This is really tough, but honestly there are just some people on your list that have no business being there.
Especially if you have debt that you need to be focused on getting rid of.
Some easy places to start are with friends and co-workers.
I’m not saying you need to become a scrooge. I’m just saying that you need to be careful who you’re buying for.
Spending money on workplace gift exchanges and friends your not super close with just doesn’t make sense most of the time. This costs a ton of money and it’s not rude to cut back. Often times your friends will understand and be happy to not feel obligated to get you a gift either.
Sometimes we should cut back family members.
I know that sounds harsh, but Christmas is not about buying gifts. We need to be less focused on the gifts and more focused on spending quality time with family and friends.
Often times you’re really just swapping money anyways.
You get your brother and 3 cousins all a $20 gift. Then they each get you a $20 gift. And odds are you really don’t love all of those gifts and you would’ve been happier to spend that $80 on something you actually wanted.
Instead of giving gifts to a ton of people, just have one big gift game like Dirty Santa for the whole family.
We started this some years back with my family and it really helps because then nobody feels like they need to spend a lot of money. Everyone just brings one gift and that’s it. And for those who may have less money, it doesn’t make them feel bad because they can still contribute.
Gifts Shouldn’t Be About the Money Anyways
Give gifts that actually mean something. Don’t just get people more and more gifts to hit a certain spending threshold so you feel good about how much you’re getting them.
There are plenty of gifts out there that aren’t super expensive.
One of my favorite things to do is give gifts of time and experiences instead of just shelling out tons of cash.
Remember, Christmas should be a time where you focus on spending time and cultivating relationships with the people closest to you. So instead of buying your dad a super nice watch, plan a day to go fishing or play a round of golf.
Get creative here, there are lots of ways to keep spending down and still get excellent gifts.
Just Explain it to People
This is huge, especially if money is tight or your fighting back debt.
Just like eating healthy, the holidays can really cause you to lose momentum when it comes to sticking to a budget. If you’re trying to fight back against your debt and pay off your credit cards and car loans, you need to be especially careful during the holidays.
In my experience, the best thing to do is just be open and honest about it with your family and friends.
Explain that money is tight and you’re trying hard to win now with your money so you can provide a better life for you and your family later on.
Tell your parents and siblings that things are tight this year and you want to get together and enjoy everyone without feeling pressure to spend a lot of money.
If you’re fighting to get rid of debt, just explain it because your friends and family probably have debt problems too. And it may encourage them to take their own finances more seriously.
Be open about trying to provide a dream life for your future and that it’s extremely important to stick to your plan through the holidays.
They will likely be more understanding than you think.
Plan Your Spending Before You Set Foot in a Store
This is absolutely huge.
Before you buy a single gift, sit down and plan how much you can afford to spend.
Do this before you look at who’s on your list. Don’t let the people on your list drive your cost. Check your budget and come up with a total gift amount first.
Once you’ve done that, then make a list of everyone you want to buy gifts for. <– Notice I didn’t say who you need to buy gifts for.
Then figure out how much you want to spend on each person and work from there.
Whatever you do, don’t hit the stores at 3am on Black Friday with nothing but a list of names. That’s a surefire way to end up overspending.
Plan your spending for each person and stick to it no matter what.
You can’t afford not to.
We Should Probably All Cut-Back
Lastly, no matter what kind of position you find yourself in this Christmas we should probably all cut back.
Whether you’re drowning in debt or the next Warren Buffet, we all could use our money a little wiser this year.
Maybe you should look at directing some of that Christmas money towards your credit card bills. Or if you can afford to spend a lot on Christmas, consider giving more to charity for people who are in serious need.
I’m not saying your family or friends don’t have serious needs.
But Christmas has become a holiday that is monopolized by toys and excessive consumption. We don’t need half the things we get for Christmas. And there are people in this world that legitimately have nothing.
So take a good hard look at your budget and your debt. You probably can’t afford what you normally spend. And if you continue spending like you do, it’s going to kill your future.
Spend less because you need it.
Spend less because your family needs it.
Spend less because your future needs it.
Spend less because other people need it.
Instead, focus on building your relationships with your loved ones and giving to real needs that can have a lasting impact.