Financial Fitness

Tips to Strategize Your Holiday Gift-Giving

Do you buy a present for your babysitter? For your coworker? Our guide helps you navigate the season.

by Nell McShane Wulfhart - September 17, 2018

With the holidays fast approaching, many people plan on making gifts—monetary and otherwise—to friends, loved ones, and service providers, such as mail carriers, hairstylists, or babysitters. But how do you decide who to get gifts for and how to take care of those you care about without blowing your budget?

First things first: Plan ahead

It’s surprisingly easy to overspend around the holidays, when retailers go into promotional overdrive. Avoid getting caught up in the seasonal chaos and keep spending within reasonable limits by building gift-giving into your annual budget. One way to do this is to take the amount you spent last year, add a small cushion to account for inflation and any new gift recipients, and then divide the total by 12. Set up a recurring transfer to move that amount every month from your checking account to a savings account. At year-end you’ll know exactly how much you have for gifts, and you won’t be paying off heavy December bills in the new year.

Who gets a gift?

Deciding who to give to and who to skip can be one of the hardest parts of the holidays. There’s no hard and fast rule for whether or not to give to service providers, but here’s a simple test: Will you feel guilty if you don’t? If so, make a point of giving something. If the recipient is someone you regularly tip, like your hairstylist, doubling that gratuity is a good rule of thumb (bonus points for including a nice card with a line or two about how much you appreciate his/her skills).

When it comes to the office, remember the cardinal rule: Gifts should flow downward, not upward. There should be no expectation of buying for those above you. If there’s a tradition of gift-giving in your office, consider suggesting an anonymous gift exchange instead so each person buys just a single gift.

Feel uncomfortable handing over cash to recipients such as teachers, mail carriers, or garbage collectors? Gift cards to grocery stores or online retailers can be more appropriate; plus, if you purchase them using a credit card that gives you miles or cash back, you’ll be gifting yourself a little something, too. Or consider making a charitable donation in a giftee’s name, which comes with a silver (financial) lining—you may be able to take a tax deduction.

When it comes to the office, remember the cardinal rule: Gifts should flow downward, not upward.

Shop all year

Once you’ve got your list pared down, it’s time to go shopping—even if it’s only April. Shopping ahead of time means less time pressure (which translates to fewer impulse purchases), no charges for rush shipping, and more opportunities for sale shopping. If you know your sister wants a coffeemaker and you find a great deal in July, snap it up. Buying in bulk if you’ve decided to get the same gift for a number of friends or service providers can also mean significant savings, so pay attention to “buy one, get one free” deals throughout the year. And keep an eye on post-holiday sales at stores where you typically purchase many of your gifts. While you might be all out of holiday spirit by early January, these sales offer some of the best deals of the year.

For big-ticket items, the plan-ahead rule applies even more. Comparison shopping throughout the year and setting up email alerts for when prices drop below a certain level can mean savings of hundreds of dollars on electronics, plane tickets, and hotels.

Tips to edit your list

It can seem like your list of gift recipients gets longer each year. Before starting your shopping, take a good, hard look at the people you usually buy for: Is there anyone to whom you give out of habit but not for any other reason? There’s no need to keep giving just because you’ve done it in the past. Eliminate recipients for whom giving feels like an obligation rather than a pleasure, such as a friend you rarely see. If you don’t feel comfortable stopping without an explanation, consider emailing a month or two before the holidays and asking how they’d feel if you didn’t exchange gifts this year. Chances are they’ll be happy to put an end to it, too.

Nell McShane Wulfhart is a freelance writer based in Montevideo, Uruguay.

Image by iStock

Additional Resources

Traveling with family at the holidays means juggling schedules—and budgets. Here’s how to plan a trip that works for everyone.

Wells Fargo Advisors is not a tax or legal advisor.