Vacation spending can be a touchy subject. Nobody wants to be the least generous gift giver in their family or group of friends, but almost everyone is looking for ways to cut vacation expenses.
Finding that balance takes a bit of tact, but determining your vacation budget doesn't have to be a guessing game. Here are some simple strategies to find a spending limit that you are comfortable with.
How much money to spend on gifts
Data from the National Retail Federation (NRF) found that the average American planned to spend $ 650 on gifts for family members, friends, and coworkers in 2020. Other 2020 data showed the average consumer spent $ 850 on gifts.
While the correct amount will depend on your income, cultural norms, and other factors, a basic rule of thumb is to spend between $ 50 and $ 100 on a gift for a family member and between $ 20 and $ 50 on a friend. Buying a gift for a colleague, like an assistant or boss, typically costs anywhere from $ 20 to $ 50.
How to determine your gift budget
Are you trying to figure out how much you can spend on Christmas gifts this year? Use the following questions to help you choose the right amount:
1. What are your current savings?
To determine your vacation budget, check your checking and savings account to see how much you can allocate for Christmas gifts. Do not spend your rent or reduce your pension contributions; Just use what you already have that is not intended for another upcoming event or issue.
If you have gift cards or reward points, you can add these amounts to the total gift budget to reduce the impact on your budget.
2. Are you getting lucky hits soon?
If your employer pays Christmas bonuses to employees, you can use these funds for gifts. One possible hiccup with this strategy is that your employer suddenly changes or eliminates their bonus policy (like what happened to Chevy Chase from National Lampoon’s Christmas Vacation).
A safe strategy is to spend 50% of last year's bonus on gifts. When you end up getting more, you can top up your gift budget or just save it for the holidays next year.
3. How many people are you shopping for?
To create a gift budget, write down each of whom you will purchase a gift for. Start by listing only those who will definitely receive a gift, such as your parents, significant other, siblings, nieces, and nephews. Include mandatory gift events like your office white elephant swap or your book club's secret Christmas party.
Next to each person's name, write how much you would like to spend on each gift. Add these numbers together to get a total. That will be your basic gift budget. When you end up with more money to spend, you can make a second list of other people you want to shop for, such as: B. close friends or neighbors.
4. How high are your other vacation expenses?
Most of us think spending money on the holidays just means buying gifts, but don't forget about other expenses like traveling, Christmas parties, and decorations. When you fly home, you may be spending more on the flight alone than on gifts.
Pro tip: Use Mint's Travel Budget Calculator to plan your vacation trip.
5. How high are your upcoming expenses?
Before handing in hundreds of Christmas gifts, check out last year's credit card and bank statements to see if you have major expenses like a biannual auto insurance premium or an annual vet check-up.
When you can comfortably afford these costs along with your planned vacation expenses, you can relax with peace of mind. If not, you'll need to cut your vacation budget to make room.
Don't succumb to peer pressure
Nobody wants to be viewed as cheap – especially by their closest friends and family members – but there is something to watch out for here. In 2020, about a third of Americans borrowed money to pay for the holidays. While it may be tempting to go over budget to get what your friends and family members are giving, consider the possibility that they could go into debt to pay for it all.
If you've lost your job, been on leave, or received costly medical bills this year, don't feel pressured to spend as much money as you normally do. Your loved ones will understand that your budget priorities have shifted and you need to make cuts.
Start a sinking fund
If planning for Christmas shopping is stressful to you, consider starting a sinking fund to make the next year easier. A sinking fund is a savings account that is geared towards a specific goal, like Christmas gifts, car repairs, or veterinary bills.
If you put money aside for a sinking fund every month, you will have enough to cover what you are saving for. Here's how it works. Add up how much you want to spend on Christmas gifts and divide that by 12. Then create automatic transfers for that amount from your checking account to a savings account reserved for Christmas gifts. By the time the next Christmas season arrives, you will already have the money you need.
Talk to loved ones before you go shopping
If you are unsure about your gift budget, discuss it with your family members and friends. You can be one of the millions of Americans who use a credit card or personal loan to pay for the holidays, and the idea of spending less could be the best gift you can give them.
You can also suggest a secret Santa Claus gift exchange, where each person buys one gift instead of several. This works best with large extended families and groups of friends since most people don't really want to shop for a dozen people.
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Zina Kumok (150 posts)
Zina Kumok is a freelance writer who specializes in personal finance. As a former reporter, she has covered murder trials, the Final Four, and everything in between. It has been featured in Lifehacker, DailyWorth, and Time. Read how she paid off $ 28,000 in student loans at Conscious Coins in three years.
