Gift Giving Hangover?

Try Something Different in 2025

When you find the perfect gift for someone you love, gift giving can be pure joy. When you are pressed for time to find gifts for all of your friends and extended family members out of obligation, it can be a real chore. No matter how your holiday season gift giving went – joyful or painful – one thing may still ring true in January. The bill is due.

According to financial site NerdWallet, only 31% of people who use credit cards to purchase holiday gifts pay off the full balance when the first bill arrives. For the majority of Americans – almost 7 in 10 – those gifts end up being a more expensive than expected when late fees and finance charges are added. Even as late as October – a full ten months after last year’s Christmas – 28% of Americans are still paying off their Christmas gifts from last year. Ho ho holy cow! Way to take the happy out of the holidays and make the Christmas aftermath much less merry.

We’ve all heard that insanity is continuing to do the same thing while expecting different results. Why not take a different approach this year to generate different results? To formulate a better plan, let’s unpack where things went wrong so we can correct them.

Diagnosing the Pieces of the Problem

Let’s start with the calendar. If we are buying gifts for Christmas, let’s admit that the date doesn’t exactly sneak up on us. It might feel like it arrives way too quickly, but last time I looked, December 25th is the date for Christmas every year. That means if we are caught off guard by Christmas, it is our own lack of preparation that got us there. Let’s make a resolution to plan ahead next time.

What else doesn’t feel too great? That big bill at the end and the 70% chance of finance charges comes to mind. According to my in depth analysis, 100% of finance charges are added to purchase made with a credit card. To avoid the finance charges, avoid using debt for gifts.

Is there anything else we can improve? How about the high stress of paying for all of those gifts at once? When it comes to buying gifts, Americans procrastinate. The National Retail Foundation tells us that in 2023, holiday spending was over $964 billion! Maybe we should spread that out a little bit. NerdWallet tells is that the cost of holiday shopping is a significant stress for 55% of shoppers. Spreading thing out over time might make that more palatable.

I think we have a list of holiday stressors to tackle this year. Now let’s see where we can go with some solutions based on better planning, changing how we pay, and when we pay.

Stress Less for the Holidays This Year

What if, instead of jamming all of that holiday spending into the last month or two of the year, we spread it out over the entire year? And what if you saved a little bit of money each paycheck along the way?

The Holiday Spending Report tells us that the average holiday spender plans to spend about $925 on gifts this year so let’s us that as our base. If you get paid twice a month, dividing the amount equally across paychecks means saving a mere $38.54 per paycheck to pay for all those holiday gifts. That sure seems like a mole hill compared to the almost $1,000 mountain when the expense hits all at once. You can increase or decrease that number, but the process will work the same. Divide the total budget for gifts my the number of paychecks to get an amount to take out of each check.

What do you do with that money? Stash it in a separate account so you are not tempted to spend it. This is a trick that the IRS uses. Money is withheld from your paycheck and you have to then file your taxes to justify the amount and either pay more or get a refund, but it is money that you don’t have to spend from each paycheck. In our holiday budget case, you need to set up the system yourself, but there is a way to put it on auto pilot.

Simple Four Step Plan

First, set up a separate account. All banks or credit unions have a club account or a secondary savings account you can use. Some banks like Ally allow you to set up what it calls buckets. Buckets provide a way to set aside money inside of an existing account for a specific purpose without the hassle and complexity of opening another account. This means you can create a bucket called Holiday Gifts and use that to stash you holiday money.

Second, look at the timing of your paychecks and schedule a recurring transfer into your new bucket. Let’s say your paycheck is deposited into your checking account on the 1st and 15th of the month. You would set up a recurring transaction on those dates to transfer $38.54 from your checking into your Holiday Gifts bucket in your savings account (or into your club or secondary savings account). It is the same out of sight out of mind concept the IRS uses to grab money from your check before you can spend it.

Third – and this is really important – leave that money alone. Simple concept, but be sure you don’t dip into your holiday fund when that perfect pair of shoes goes on sale, or the tire blows out on the car. If you use that as an emergency fund, it will be the sad montage in the movie Up where the young couple keeps saving just to repeatedly break the piggy bank and drain their trip fund.

Finally, and this is the fund step, when the end of the year rolls around and you have been on Santa’s good list by not touching the money, you will have $925 in cash to spend on gifts. It may seem like a Christmas miracle, but in fact it is just good planning and execution. That pile of cash is not permission to overspend, it is a way to make sure you don’t have the same gift giving hangover next holiday season that you had this year. Having the cash on hand growing throughout the year also means if you find a great deal on a holiday gift in July and you already have the money, go ahead and buy it and shove it on the top shelf of your closet. Just remember that it is there so you don’t forget to give that gift when the holidays roll around. Not that I have ever done that.

PRO TIP – Using https://camelcamelcamel.com/ to examine pricing patterns can save you money when you purchase gifts on Amazon.

This article is designed to help you get on top of your money and lower your holiday stress level. If have resolved to make progress on your financial goals this year, start the process with a Financial Checkup. Schedule a free no-obligation consultation to see where you are on the financial roadmap and build a plan for a better future for you and your family.