By: Laura Walton AFC®
Holiday gift giving is often a wildcard in our spending budgets. And, like other money topics, people don’t talk about what they spend on gifts so we’re left to wonder how our spending compares. I was interested to learn that the Brits top the chart in spending for European countries…can you guess where Americans rank?
At an average of $542, Brits plan to spend a good bit more than the French ($369), as well as the Germans and Italians ($246).
The most generous gift givers are the Romanians who spend 33% of their December income on gifts but, because of modest incomes, this represents a lower dollar amount ($135). The British spending equates to 17% of their monthly income.
What about us? No surprise, we win! We’re projected to spend $804 this December which is roughly 19% of our median monthly income. Of this, $460 is spent on our family, $136 on friends, co-workers, babysitters and pets, $105 on food and $103 on decorations, greeting cards and flowers.
Now, what about paying for our spending? U.S. households with incomes of $50,000-75,000 take an average of 2.6 months to pay off holiday debt while 12% take a full year; 14% of Brits and 20% of Romanians still have credit card balances from Christmas 2013.
Both lower and higher income families take less time to pay off holiday debt than the $50,000-$70,000 bracket. Families in the middle income bracket may have higher credit limits but not necessarily more money available to pay off balances.
As our incomes rise, we often start spending a little bit more across all categories – we eat out a little more, we buy a few more clothes, we’re more generous with gifts, etc. The technical name for this? Lifestyle creep. At the same time, our taxes bump up. Next thing we know, we’re hoping to pay off our Christmas debt with our tax refund.
Lower income families keep their spending in check by necessity; higher income families have the extra income to cover the extra spending. Middle income families do have more to spend but it typically doesn’t go as far as we think it should. When I ask clients how they justify spending they can’t easily afford a common answer is “I make enough money, I should be able to afford it.”
This holiday season make a list that includes gifts that cost less money but require more thought. It reduces the gift giving pressure for everyone in your circle and, after all, we know that it’s the experience we remember fondly, not the “things” are used up and tossed out.