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Gift-giving season doesn’t have to wreck your finances

In fact, it shouldn’t. You just have to do a bit of planning and boundary setting

Before spending anything, think about what someone else may really want from you. It’s not always the most expensive gift that’s cherished, particularly if you’re dealing with someone who can probably just buy whatever they’d like. (Unsplash)

The season of gift giving is upon us. At least, that’s the narrative. The truth is that gift giving is a year-round dilemma. Birthdays, graduations, retirements, weddings, baby showers, fundraisers—our wallets are constantly being bombarded with requests. To prevent these from undermining your financial plans, it’s important to get a handle on the economics of gift giving.

First, let me come clean. Giving gifts is my love language. Christmas morning is my Super Bowl. The excitement I get from seeing those I love open gifts I’ve spent weeks or months selecting is always far more satisfying than seeing what’s under the tree for me. I’d easily cross the line into overly generous if I find the perfect present for someone. But even though this is my modus operandi (or perhaps because of it), I’ve learned to be disciplined about creating a gift-giving budget—and you should too.

Also read: Last-minute holiday gifts for your loved ones

Before even thinking about how big of a check to write a new grad or how much to drop on a wedding registry purchase, you have to assess your own financial health and goals. Without calculating how much you can actually afford to spend on others, you risk drawing on money that you need for other priorities. According to a recent LendingTree survey, 41% of Americans believe it is likely they’ll incur debt for holiday spending in 2021, and 13% are still paying off last year’s gifts. You have to put on your own financial oxygen mask before assisting others.

My husband and I have a strategy to sit down and plot out our gift giving at the start of the wedding season and a few months before the holidays. The factors vary, but things we consider include: how many gifts we’ll need to buy, how close we are to the recipients, other costs involved (e.g., to travel to the event), reciprocity (e.g., how much did they spend for our wedding gift), are we buying multiple gifts for one party (e.g., engagement, bridal shower and wedding) and is there a mutually set price limit (e.g., sibling Secret Santa with his family is $50 per person). Then, there’s the almighty, but nebulous “what feels right” based on likely expectations.

Once we come up with an approximation of how much we’ll be spending on gift giving overall throughout the year, it becomes an additional goal for our financial plan. We even have a savings account specifically earmarked for it, which is funded monthly just like our other savings and investment goals. This makes it much easier to avoid jeopardizing other plans in the name of social pressure and not looking cheap! I also like to use the cashback benefit from two of our credit cards to pad our Christmas budget without any extra work. 

Before spending anything, think about what someone else may really want from you. It’s not always the most expensive gift that’s cherished, particularly if you’re dealing with someone who can probably just buy whatever they’d like.

For example, in 2019 my sister and I planned a “family day” for my parents for Christmas. We gave them an itinerary of various activities we’d scheduled and set rules including putting phones and computers away. The focus was on quality time together since we don’t live close by and only see each other a few times a year. My sister and I finished the day by making dinner with an elevated, adult take on our favorite childhood recipes—baked spaghetti, anyone?  

When I’m the recipient, I always prefer a thoughtful, carefully selected gift over a more expensive one that feels generic. Of course, this requires forethought and time. But even if the giver wants to err on the side of gift cards, I’d prefer it be a shop I actually frequent over the typical catch-all of Inc. The smallest bit of thoughtfulness goes a long way.

One thing to be wary of when it comes to gifts: potential resentment about any imbalances in giving. “Sex and the City” viewers will remember that one episode where Carrie shows up to a baby shower only to have her expensive Manolo Blahniks stolen—and thus ensues a debate about single women being forced to shell out for weddings and showers with reciprocity only to come if they opt in to the same traditional life milestones. The nearly 20-year-old episode encapsulates a sentiment that’s probably even more prevalent today. But I’d characterize the lesson a bit differently than the show did: My take is set boundaries early. 

This may mean learning to say no more often, setting new expectations or changing traditions. For example, as families grow, it becomes more expensive to gift every single person. What started as everyone receiving a gift from each other might need to become a White Elephant gift exchange, a Secret Santa set-up or even a gift-free holiday. Bring up your thinking about the situation at least a couple months in advance and be willing to opt out if no one else wants to change the current dynamic. 

You think it’d take the fun away, but setting rules and boundaries with others (and yourself) makes it much merrier to be generous with your loved ones.

Erin Lowry is the author of “Broke Millennial,” “Broke Millennial Takes On Investing” and “Broke Millennial Talks Money: Stories, Scripts and Advice to Navigate Awkward Financial Conversations.”

Also read: A compendium of beautiful objects that make for eco-friendly, conscious and ethically made holiday gifts


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