This week I had the
opportunity to participate in a radio interview for Marketplace
Weekend at the University of Arizona PBS station. This proved to
be a very interesting opportunity, not only to see the inner bowels of a radio
station, but to hear from listeners about their gifting concerns. This was
insightful as many of their concerns may be shared by you.
1. Q. Do you have any tips on how to balance
your finances during the holidays?
A. The most important thing to know about
gifting is: can you afford to do it? If your answer is yes, how much of your
annual budget should you allocate to gifting? Considering the average family spends 60%-70% of their after tax income on the necessities of life,
that leaves 30%-40% to spend at your discretion. Discretionary items include
personal care, clothing, entertainment, holiday travel, gifts and charity. A
realistic budget for gifts is 1%-3% of your after tax income. A similar amount
can be used for charitable causes. If you have a lot of debt, or are not saving
at least 10% of your income each year, it’s best to stick to the lower range.
The best way to plan for
gifts is to set up a Gift Savings Account in advance. This is a special bank
account to which you contribute a preset monthly percentage of your income. You
contribute an amount you can afford and you wish to devote to gifts. This way
when the holiday season rolls around you are ready.
