Sunday, 14 December 2014

How much money you should spend for Christmas ?

How much money should you spend when you are buying Christmas presents for your family?

With Christmas right around the corner, you are probably starting to look for sale prices on the items that your kids want for Christmas.

As a parent, it is easy to get carried away with Christmas presents.  I know that I always say I am not going to do as much this year, and just keep saying "oh this would be perfect".

The problem with this is that before you know it you have racked up a bill that will take months to pay off.  The dreaded Christmas credit card bill will arrive!

Staying Within Your Means

The most important rule for Christmas spending is to make sure that you are staying within your means. It doesn't make sense to overload the credit card if you don't have the cash available to pay it off, because credit card debt will only result in on-going stress throughout the rest of the year.

Keep in mind that putting your Christmas shopping on a credit card means that you will end up paying more for Christmas in the long run, because you will need to pay the interest costs that are accrued for every month that the balance remains on the card.

Instead consider your budget, and make sure that you are setting aside money each month for your Christmas fund. Talk with your spouse and determine the amount of money that you would like to spend on each child, and then calculate the amount that needs to be saved each month in order to be ready for Christmas.

Consider this a time to teach your kids to budget!

Calculating Your Christmas Costs

One good method to calculate your budget is to choose a specific percentage of your after-tax income, which will help you to avoid getting into financial trouble. A good rule of thumb is 1 - 2% of your after-tax income.

For example, if you have a household income of $60,000 per year after taxes, and you choose to spend 1% of your after-tax income, then you would have $600 to spend on Christmas. Then, divide that number up between the number of people that you need to buy for.

Of course, you can choose other budget amounts depending on what you feel is right for your family. But, the most important thing is to make sure that you have a plan in place ahead of time, and stick to the plan when it comes time to do the Christmas shopping.

Should You Spoil Your Kids on Christmas?

If you have the means to spend more money, does it make sense to spoil your kids every Christmas? This decision is really up to each parent, and you need to consider the things that your family needs and wants.

For example, if you have a bigger Christmas budget this year, then maybe you could consider buying items that they need, such as clothes or school supplies.  This is one of my favorite ways to control the costs of Christmas.

These items will give the child more presents to open, and they help the gift-giving to be practical and fun at the same time. Additionally, you can buy them a few items that they want, like toys, games or electronics.

You may also consider using this as a time to give them educational items that they might not get in school.  Here is a list of books on financial education I would recommend.

Avoid the Snowball Effect

One trap that parents often fall into is seeing just one more item that they want to buy for one child... and then feeling obligated to buy something else for the other child in order to make it "fair."

Yes, it is important to keep the spending levels equally matched between the children, but don't rationalize your way into overspending because you found one more item that throws off the balance of spending.

If you can't pass by that one item, then you might buy it now and save it for the child's upcoming birthday or another celebration. Or, consider taking a different item back to the store, to exchange it for the newer item that you want to buy.

No matter what plan you decide on, remember Christmas is not about the amount of gifts you can give, but celebrating a religious holiday.  Even if you are not religious, remember it is about family, love and sharing - not the gifts.


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