Each year, we have shared dozens and dozens of tips, ideas, tricks and more for sticking to your Christmas budget and how to not go into debt – you can find a number of these articles linked below for further reference.
But this year, we wanted to also present to you some financial ground rules for Christmas that we have adopted for our own family to help us stay in budget and stay out of debt.
How much should we spend on Christmas?
This is a great question! There is not one blanket budget for all families. However, we have come to find a consistent rule-of-thumb that serves as a good guide and basis for families and individuals when determining how much you should spend.
That rule-of-thumb is that your Christmas budget should be 1% of your gross income.
Obviously this is a guide and not a mandate for your family. We even go so far as setting this as 1% of our net income for the year. But no matter how you set it, make sure that when you do, whatever you spend shouldn’t exceed that threshold you set.
You might want it to be more or even less. In fact, when we were getting out of debt, our Christmas budget was actually less than 1/2% of our net income. We pinched pennies hard and followed many tricks including stacking savings galore and buying used toys for our kids.
We implement this each year by starting with the first paycheck in January and putting 1% of our income into our Christmas savings account. We start at the beginning of the year so that we have quite a nest egg of funds ready for the heart shopping season. Make sure you start this upcoming January regardless of where you are at in paying off your debts. The financial burden is greatly reduced or even eliminated with this small plan from the beginning.
We are debt-free now, and as such our kids are older, heading into teen years and their requests are growing (one wants a drone, one wants a fitness band, etc.). In essence, we still stick to our 1% net income rule and start building this savings account up in January. But then we find opportunities to increase our income or engage in money-making opportunities specifically earmarked for Christmas spending to add to our 1% rule if we want to spend more than that. I did something even more extreme this year that had such amazing results that will give us more than enough without us even needing to dip into our Christmas savings at all and maybe use that saved money for an extra vacation this upcoming year instead.
We’ve shared many ideas on how to increase income during the year, and even specifically during the Christmas season. Find some of these linked below.
How many gifts should we give to our kids?
This is a hard one for me. I want to give and give and give again! But even if I can fit it all in my budget…the question is should I? What would we be teaching our kids if we just threw on piles and piles of gifts? It certainly sets an expectation each year. The other issue that it raises is discontentment.
It’s something to consider and think about.
So a good rule-of-thumb for gifts for kids is the following:
- Something they want
- Something they need
- Something they can do
- Something they can wear
- Something they can read
We also provide a new family game each year too and a couple of small gifts in their stockings which is generally a small toy and a small need (e.g., for a young boy like a Hot Wheels Car and a fun toothbrush).
In the end, for our kids this means the toy/item they wanted is where the majority of the spending limit per person is spent, then the remaining to clothing/shoes or something along those lines, a craft/hand’s on kit and a new book, plus the couple of small stocking gifts.
We like to give the books on Christmas Eve (it’s become tradition) and the kids love it! They do know they are going to get a book, but it’s always a mystery as to what! Plus, the family game is given on Christmas Eve and played that night with a homemade pizza party! It’s a super fun tradition.
To accomplish the gift goals within the budget, we give our kids an expectation. The 1% is not just for them, it’s the gifts for all. For us, it’s vitally important to share the expectations with our kids beforehand. We try to evenly divide the budget spent on each kid, but let them know that this is the expectation this year. They can’t all have a $100 gift as their main gift. It’s not going to happen! If there is something they really desire that is more expensive, we do discuss with them about getting a large gift to share. We have done this a few times and it has worked well, better than well in fact because they tend to appreciate the gift more and play with it more, take care of it more when it is also someone else’s gift.
What should the expectations be for extended family and friends?
This is a very important part of the financial ground rules for Christmas. Have a discussion with your extended family and close friends, those in which you have traditional gift-giving exchanges with. Set an expectation and a reasonable budget and a set number of gifts. For example, with my sister, she gives our kids something fun under $10 and something practical under $10. When it comes to grandparents, they certainly give more than we give in exchange. But that’s the way they want it. 😉 We often give our parents handmade gifts and have a specific budget set for gift buying that everyone is well aware of. Having the conversation before will often eliminate confusion, hurt feelings, embarrassment, etc.
For other friends and acquaintances you can consider handmade goodies or bulk homemade gifts (we’ve made candles, treats, ornaments, DIY biscuit mixes, homemade jam, etc.) and our kids have handed out lip balms, pencils, candy turned Christmas themed, etc. Basically items that we can make a lot of for one flat price.
Last year, we gave out the homemade jam and biscuit mixes to neighbors, friends and church family. We estimated it cost about $1.50 each gift. For those that live close to us, we also added the special treat (or not if you have ever heard our voices 😉 ) of giving the gifts with a plate of cookies when we Christmas carol at their house as well. It’s a special time for our family and for those we sing to as well.
Should there be anyone else we should think about for gifts?
Yes! We think there should be two groups – those in need and those who provide you services on a regular basis (see below for more details).
When it comes to those in need, consider making it a family tradition to provide gifts for those that are less fortunate. Think about opportunities like a family in need at your church or locally, an Angel Tree scenario or something similar. Plan your giving budget ahead of time and choose a giving opportunity that is appropriate to your budget (so you don’t overspend and go over budget).
There is also a common understanding that you should provide an end of year tip to those that provide you services regularly. What are we talking about? A cash tip or a gift to show your appreciation to those who have served you and your family in some way throughout the year.
These would be examples like:
- Newspaper Carrier
- Garden/Yard Help
- Hair Stylist/Nail Tech/Barber
- Delivery Person
- Massage Therapist
- Babysitters/Nanny/Day Care Worker
We read many sites that have stated at least a $20 gift or tip and often the gift or cash should equal that of one service that this person provides, but let’s be honest, if we work through the recommended list of recipients at a recommended value of $20, you could be using your entire Christmas budget just on this one category! The other exception is that you probably don’t have all of these. We really only have a couple of these on the list ourselves (one being one that everyone has – the mailman).
On the other hand, $20 might be steep. A $10 tip or gift is something we usually our goal! It means we can actually do it and it fits within our budget. When we did subscribe to the newspaper, we did give our carrier a cash tip every year as well.
We also say this because it is such a sweet gesture and kind way to say “thanks.” We actually delivered newspapers for a while as adults with children to help us start our debt-free journey. Out of all that time with multiple routes, we did receive one tip (she was so sweet, rushed out early in the morning to catch us and we still remember her today). We do understand now how nice it would have been to have received even a little something from our other customers, especially after getting up seven days a week at 4:30 in the morning to get them their dry newspaper by 6 am, so we could pay our bills at that difficult time of our lives.
One additional group to consider is that of teachers and school staff. They cannot accept cash, but it is a great time to give a special gift of treats or something small and handmade. Teachers love to receive little tokens of appreciation, especially this time of year! In fact, Alex’s dad drives a school bus now after retirement and we can tell he loves the continuous handmade gifts and baked goods he receives as he often posts about them on Facebook.
Finally, one person to consider is that of a Pastor or other church staff if you are a member of a church. Each year, we do give our pastor a cash gift and a basket for fruit or other foods. Our pastor does not have kids at home any longer, but if he and his wife did, we would also give gifts to their children as well. Something to think about this year and beyond!
Well, there you have it! The Financial Ground Rules for Christmas from The Thrifty Couple. This can be a deep subject and much more complex in nature, but we tried to share the basics of the ground rules we live by for Christmas.
Feel free to share any others that you and your family live by below!