How Much Should You Really Be Spending on That Gift?

You don’t want to look cheap, but you can’t afford to blow your budget. Follow this simple advice to decide how much to spend on each person on your list.

The holidays are supposed to be the most wonderful time of the year, but sometimes they can end up feeling like the most stressful time of the year. From hosting (and attending) parties, to navigating jam-packed schedules, to finding the perfect gift for your friends and family members, there’s a lot to juggle—and a lot of money to be spent. And especially vexing is figuring out how much money to spend on each person.

The National Retail Federation estimates that the average family will shell out roughly $462 on gifts for family members this year. Add to that the $132 that the typical person will spend on gifts for friends, co-workers, babysitters, and teachers, and you’re looking at a nearly $600 gift budget. But if you don’t have that kind of disposable income, it can make following general gifting guidelines nearly impossible to follow. Here’s how to calculate a budget that works for you.


Use Cash

Photo by Jens Mortensen

The most important rule to follow for holiday gifting, according to Manisha Thakor, director of wealth strategies for women at The BAM Alliance, is that “if you can’t afford to buy a gift right now in cash, you can’t afford to buy it.” Be realistic when it comes to what you can afford, and, if possible, take that money out from the ATM and use it for all of your in-person gift buying. If you’re shopping online, put that money on a Visa or American Express gift card. When it’s empty, you’re done gift shopping.


Make One Budget

Thakor’s other main piece of budgeting advice is to set one holiday budget. Unless you really like managing your money, most of us will get overwhelmed trying to plan out how much to spend on different categories, like family members, hostess gifts, and decorations. Instead, start with your main budget, and shop for the most important people—your spouse, kids, parents, etc.—first. Then use what’s left to buy gifts for your friends, co-workers, and extended family.


Don’t Try to Keep Up With the Joneses

While it might be uncomfortable if a friend or family member gives you a much costlier gift than you are able to give them, remember that it’s not worth going into debt just to keep up appearances. “In so many aspects of our lives, we’re still terrorized by the ‘shoulds,’” Thakor says. “They are those invisible, self-inflicted expectations about what we should be like, look like, or spend our money on.” Setting those aside and sticking with your budget can be difficult, but it can also make you a more thoughtful and creative gift-giver.


It Really Is the Thought That Counts

Yes, you’ve heard it a million times, but that’s only because it’s true. And even more so now that we can shop for gifts with a few clicks on your laptop. Being a thoughtful gift giver is more important than spending a lot of money in the end. “When you show you’re a good listener and really understand the person, then the dollar amount becomes much less important,” says Jodi R.R. Smith, founder of Mannersmith Etiquette Consulting. Aim for a gift that establishes a connection and solidifies your relationship, says Thakor: “When you are able to exchange a present that conveys how well you see, know, and care about the recipient, that’s when the money ceases to matter.”


Break Out the Calculator

If you still really need a hard and fast budget for each person, it’s time to grab the calculator. Garth Sundem, author of The Geeks’ Guide to World Domination, has come up with The Gift Budget Equation (GBE), which will help you divide your budget amongst the people on your gift list based on their importance to you. It uses a bit of simple math, and works no matter how larger or small your budget is. If you want to give the GBE a try, check out Sundem’s explanation of it on Geek Dad. Of course, once you have your budget breakdown you can adjust as necessary, and as Thakor advises, start with the big gifts so you can use any leftover funds for the other presents.

Once you have your budget all figured out, you can chime in on our #FindMyGift Twitter stream, where Real Simple editors help to brainstorm gift ideas for everyone on your list.