The question that usually comes next is, “Are you ready?” but maybe the question we should be asking of ourselves is “How much are we going to spend?”

The National Retail Federation, along with other organizations that survey consumers, keeps track of consumer spending and they estimate that you will spend about 5% more than you did last year on gifts, decorations, parties, etc.  And it is all pushing towards $1,000 for the average American this year.

Where Are Those Dollars Going?

The bulk of that cash is going to gifts for family.  More than half, in fact.  The remainder is pretty evenly split between decoration, holiday travel, and other Christmas expenses like cards and hostess gifts, etc.

We are now also doing about half of our holiday shopping online.  The rest in stores and a small portion of our gifts are homemade (ah, I love a homemade batch of Christmas cookies!).

This year a little over 25% of consumers expect to go into debt, using credit or loans to purchase holiday gifts and supplies.

What Should You Spend?

Obviously that question is quite subjective and widely open to interpretation.  If you feel like you did well last year go back to your expenses and add them up.  If your income has stayed static over the past year that may be where you want to land again.  Financial gurus suggest your budget should be somewhere below 2% of your yearly income, so if you earn around $50,000 then somewhere around $800 or 1.6% should be your entire Christmas spending budget. Once you have settled on a budget for this year then… wait for it… stick to it! 

Having a budget is a great idea only if you implement.  While budgeting may not sound very generous or in the holiday spirit, it is kind to your future self who will have to deal with the aftermath of overspending (or underspending, but who does that during the holidays, really?). 

Where Should it Go?

Begin with your priorities.  Who is the most important person to shower with gifts this season, your kids, your significant other?  Shuffle your list to put these people on the top and plan on spending the bulk of your budget, over 50%, there. 

Now look at your remaining list.  These are your gift card and cookies folks.  If there is a third tier of friends and family maybe they can go in the Christmas card and letter category.

Don’t Forget Santa!

Don’t forget the tree, and those things that make the season feel festive to you.  Maybe you can forego the high electricity bill putting lights all over the house this year, but you can’t go without that special holiday ham!  Maybe you can’t throw the whole party yourself, but if you make it a potluck you can still spend quality time with your friends.  Creativity and good cheer go a long way!

Merry, merry!