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How much to spend on the holidays?

October 9, 2009 By Megan Smith

On the Today Show yesterday (I was home sick), Jean Chatsky said that you should spend no more than 1 1/2% of your annual salary on the holidays.  It was during a conversation about gift buying, so I am assuming that’s on only gifts and not on travel.

Even a percent of your salary seems like a lot of money.  Traditional wisdom says to put away 10% of your salary.  Many people also tithe another 10%.   But if you’ve got kids, I can see the desire to make their Christmas as amazing as wonderful as possible and be able to give them everything that they want.  And it depends on what you’re buying as gifts.  I know a lot of families who use Christmas as the time to replenish their children’s wardrobes.  Kids have this annoying habit of outgrowing their clothes after all.

Still, 1.5% of your salary.  That’s a lot of money no matter what you make.  I’ve never thought that closely about what I spend on Christmas gifts.  Maybe this year, I will look in relation to my total budget and see where I fall.  What do you think?  Is 1.5% reasonable or does that seem high to you?

Megan Smith
Megan Smith

Megan is a 40-something government employee in the Washington, DC area. She got interested in Personal Finance when she got out of college and realized that her paycheck wasn’t going to go as far as she had hoped. Since starting this blog, she has managed to buy a house and make a solid start on her retirement goals, and hopes to help others do the same. Here is her story:

In 2007, I was a gainfully employed 20-something with no debt but not a lot of knowledge about personal finance.  It was a co-worker’s comment about Roth IRAs that sent me to the internet, searching for information.  It was then that I realized that I really didn’t know a whole lot about personal finance and that my current financial situation was due a lot to inherent frugal tendencies, generous family members, a fear of debt, and good luck.  While that was working for me, clearly I needed a better plan.

While I had no debt, I was also pretty much living paycheck to paycheck and not worrying about going over budget (I say this as if I had a real budget) because I had an emergency fund set aside to cover any overages.

Except that’s not what an emergency fund is for.

So I did a lot of research, read a lot of blogs, and decided that I needed a plan.  I needed to budget.  I needed to know what I was spending my money on.  I needed to prepare for the future.

I decided to create a blog not only to make myself accountable to others but also to share the knowledge that I gained along the way.  I’ve learned so much from my fellow bloggers, and I hope that my readers can find something useful in what I have to share as well.

Filed Under: holiday

Comments

  1. Kristen@The Frugal Girl says

    October 9, 2009 at 8:26 am

    We spend about 3/4 of a percent on Christmas (just did some math to figure it out!).

    We do tithe 10% of our gross income, but we definitely don’t spend 10% on Christmas! Lots of money isn’t necessary to make a fabulous, happy Christmas for our children.

  2. Rachelle says

    October 9, 2009 at 2:07 pm

    I’m with you, I really think 1 percent is still pretty high. At 23, I don’t really have an obligation to make anyone’s Christmas special, but I try to give what I can. I think I spend less than 1/2% on that.

  3. Mrs. Accountability says

    October 11, 2009 at 11:02 pm

    Do you think she meant gross or net? If a person made 30K gross a year, that’s $450, or is my math wrong? I think it must have to do with how much money you make. I mean, if you make $100K a year, that’s $1500. I remember reading on a couple of blogs that people spent, wait, I remember, one was Mr. Debtbeater back in early 2008. He said they spent $6500 for Christmas! http://www.debtbeater.org/analyzing-the-holiday-financial-setbacks/ I have read on a couple others spending two and three thousand. Maybe that’s why the lady advised to keep it to 1.5% of one’s income. ?? When I was 18, I remember a boss of mine telling us at work how he was STILL, two years later, paying for a Christmas when he went nuts with the credit cards and bought all kinds of things for his family. That really made an impact on me.

  4. Meghan says

    October 12, 2009 at 1:49 am

    Really, that’s probably just about what we spend–1%ish. Total–our daughter, presents for each other, presents for our families…

    We do tend to use Christmas a time to pick up new (well, some new, some thrifted) clothes for people and new shoes, plus we buy a ton of books for presents, and in all honesty, I’m okay dropping $100 on books.

    I feel like if we were making, you know, triple what we make now and somehow still spending 1% on Christmas, that’d be pretty messed up, but in the 35-65K (gross) salary range, it seems fairly reasonable to me.

  5. Sadie says

    October 13, 2009 at 4:33 pm

    Holy moley! That’s over $1000 for me. There’s no way I’d spend that much. I budget about $300 for Christmas–to cover 3 family members, 2 kids, and my boyfriend. I even think that’s a lot, frankly. But in the past, I used to drop $1000 doing nothing. I’m now working my way through a 3-year plan to pay off my debts, so this year, I actually lowered my budget to about $250 for gifts. I can’t imagine spending 5 times that much. It’s nuts!

  6. Michelle says

    October 16, 2009 at 12:24 pm

    Holy Moly! That seems high – on my salary alone it’s 1000+, with DH’s thrown in too, then we’re at 1700+. WAY TOO MUCH. Of course, it’s just us and a 3 year old, as both our families have insitituted ‘no spend’ Christmases (otherwise, we’d have 6 sets of siblings/spouses and about 15 nephews/nieces – not to mention parents/in-laws).

  7. Small Business Tax Guru says

    November 22, 2009 at 11:47 pm

    I’ve been engaged in taxations for lengthier then I care to admit, both on the personal side (all my working lifetime!!) and from a legal viewpoint since satisfying the bar and following tax law. I’ve provided a lot of advice and corrected a lot of wrongs, and I must say that what you’ve posted makes utter sense. Please uphold the good work – the more people know the better they’ll be equipped to comprehend with the tax man, and that’s what it’s all about.

  8. Tracy says

    January 6, 2012 at 10:55 am

    The majority see the obstacles; the few see the objectives; history records the successes of the latter, while oblivion is the reward of the former.

Trackbacks

  1. 2009 Year in Review (part 3) « Counting My Pennies says:
    January 18, 2010 at 6:02 am

    […] big savings or little savings.  I think the answer is both.  I discussed gift purchases as a percentage of your salary.  A friend started pre-spending her bonus.   Personal finance bloggers were called out for being […]

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