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.
2. Q. Tell me about the chart you have for making Christmas presents, and
other expenses during the holidays, that works for many different budgets.
A. Make a list of all the people you wish to give a gift to. Divide that
list into three categories: your primary relationships, your
secondary relationships, and service providers. For example, gifts to your
spouse and children would be your primary gifting; gifts to parents, siblings,
nieces and nephews might fall to your secondary list; gifts to service
providers [such as the newspaper or mail delivery person, or your children’s
teachers] would make up your third list.
Now take your annual gift
budget (1%-3%) and allocate a dollar amount to each group; say, $75 for
immediate family, $25 for extended family and $5-$15 for service
providers. Clearly, the larger your family and the lower your
income, the smaller each gift will be. If this is the case, you may wish to
provide some groups on your list with a hand written card or some homemade
cookies. One listener provided her own family’s plan, one that is used by many
large families: that is to draw names from a hat on Thanksgiving and buy a
gift ONLY for that person. Depending on your family, this “draw” could include
everyone, only the children or only the adults.
Don’t forget to leave
money from your annual budget for other occasions like birthdays and special
occasions. By setting a budget in advance, you will be ready when it comes time
to go shopping. You will know:
- Who
is on your gift list
- How
much you can spend on each person
- The
occasions you wish to celebrate with a gift
This should help
you to resist temptation when you go to the shopping malls.
See a sample of my chart
at the end of this blog.
3. Q. When you’re short on funds but your friends, family (especially kids)
still expect gifts for the holidays, how can you budget?
A. Gift giving is not a competitive sport. The best gift you can give your
family is financial security: the confidence that you are taking care of their
long-term needs first.
If you have yet to
set up a Gift Savings Account and money is tight, maybe this is the year to
celebrate in the old fashioned way: with homemade decorations, cards, simple
gifts and time spent together. My favorite Christmas memories are the ones
spent out in the cold skating with my family, especially my dad who worked very
long hours and who I could never see enough of.
Children will not
remember the gifts they did not receive; they will always remember the good
times spent together, milk and cookies left out for Santa, the dog who stole
their Christmas candy, how they risked mom’s scolding by eating all of the
candies and fancy tinfoil-wrapped chocolates used to decorate the tree.
4. Q. I want to go into a little bit of debt … just a little … to buy gifts
that I hadn’t anticipated this year. Is that okay?
A. Can you pay off ALL of your credit card debt by January?
No? It would be better to set up a savings account now for next year. That way
you will be ready to join in the purchase of gifts free of debt. In the
meantime don’t forget that some of the best things in life are free.
5. Q. Getting creative with your gifts, or not
giving gifts at all, seems like a great idea if you can’t spend a lot. Is it a
great idea?
A. Absolutely. There are many ways to show our love and appreciation.
Gifting is just one of the five love languages identified by Dr. Gary Chapman
in his books. The other four are: words of affirmation, quality time, acts of
service and physical touch. Can you think of a way to “gift” the people in your
life with one or more these?
- Words of Affirmation – these can be spoken or
written: perhaps a well-thought-out card or letter
- Quality Time – perhaps one of your loved ones
is lonely or overwhelmed with caretaking of children or an elderly parent.
Would they appreciate time spent with you, or time off from their
day-to-day burdens?
- Acts of Service – One listener recalled that as
a child she would provide her parents with a homemade “gift certificate”
promising to take the garbage out or walk the dog on a stormy day.
- Physical Touch – Sometimes our loved ones
simply need to be reassured of our love for them with a BIG hug. What
could be simpler than that?
6. Q. Most people hide the price of the gifts
they give others. (They remove the price tag, mark it out, etc.) Should people
know how much you’re spending on them? Should you set limits before exchanging
gifts?
A. Hiding the price is a very subjective thing. If smart shopping allows you
to buy throughout the year when things are on sale, why shouldn’t you use that
to your advantage?
Setting limits provides
everyone with the opportunity to weigh in and be clear about their own budgets.
Respect should be given to those who set the lowest dollar amount, as they may
be struggling with other costs.
7. Q. There are many charities out there that you can give
to. It’s hard to choose, and it’s hard to choose just one. How do you decide
how much you can give and still feel like you’re making a difference?
A. Rebecca, wrote in with a suggestion of her
own: “So that we aren't spending a lot on the holidays, we've been
donating to charities in lieu of purchasing gifts for others. Last year we
adopted a few families from a local charity, and this year we'll do something
similar. We end up spending about the same as we would on gifts, but get more
out of it (we think).”
What a great
idea! Not only do Rebecca and her family feel better about their
holiday giving choices, they are now eligible for a gift of their own from
Revenue Canada. Each dollar donated is eligible for a tax credit up to 75% of
income.
The best way to choose
the charities you wish to support is to conduct an online search of the best
charities. The most important thing is to donate to something you are
passionate about. The second most important thing is that the charity is well
run and spends most of its funds on doing good, not on supporting itself with
advertising, marketing, staff salaries, etc. Taking the time to research your
choices will increase your confidence in your gifting.
One of my pet peeves is
retailers who ask you for a donation to a cause they are supporting, as you are
checking out. Contributing $1 or $2 each time you are asked may not seem like
much but it can add up. Consider:
- Who
receives the credit and the tax deduction for this donation? The retailer!
- How
does supporting a retailer’s cause help you to meet your own charitable
donation goals? It does not!
- Would
it not be better to carefully consider the causes you care about and the
charities you wish to support? Not only will you give in accordance with
your values, your giving will be within your budget.
- Do
not be afraid to say no. An explanation is not needed. If you feel
obliged, simply tell them you have make contributions in your own name.
Now that you are well
prepared for the shopping frenzy, good luck out there.
Wishing you and yours the
best of the season.
Sample of
Gift Giving Chart
Annual Budget $1,500
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