This season of decking the halls is certainly shaping up to be completely different from anything we could have imagined 12 months ago. The coronavirus pandemic is impacting everything from how we travel to how we budget for the holidays.
In more normal times, the typical advice is that you should spend no more than 1% of your annual salary on holiday gifts and travel. That means that if you earn $50,000 per year, you should plan to spend about $500. Ideally, you save up for this cost well in advance, putting aside a small amount every month until you reach your goal.
CNBC Select spoke to Mint financial planner, Brittney Castro, CFP, about whether that number should go up or down this holiday season. Here’s her advice.
This year is an opportunity to be honest
While this time of year is full of fun traditions, the holidays are also typically associated with rising stress levels. It can be overwhelming and sometimes expensive, as we race to plan and prepare the perfect holiday. And it’s no surprise that last year the average person planned to spend $1,048 on holiday-related expenses, according to the National Retail Federation.
But this year allows us to change how we approach the season, with more families opting to connect via Zoom or FaceTime in order to curb the spread of coronavirus. Castro argues that now is the perfect time to be honest with yourself and loved ones about what is realistic.
“This year, especially, be real about what the number really is that you can afford,” Castro says. “You don’t have to buy for every person.”
That’s not to say you shouldn’t give gifts or find ways to travel safely. But remove the pressure to overspend, says Castro: “Getting into debt to pay for gifts is not necessary. I think more people are coming to that realization.”
Consider low-cost gifts and quality time
As you let go of some of the pressure to dazzle family members with the perfect gift or travel across the country to see your relatives, consider what kind of holiday experiences would bring you cheer and delight.
“Go on a hike,” says Castro. “Send [loved ones] a sweet note or a phone call and check in and see how they’re doing. It’s more about being able to be with each other and express your love.”
Another good way to make the season meaningful is to make a donation to an organization that you or your friends and family care about rather than giving gifts. Or consider doing your shopping at local small businesses instead of major retailers so you know your dollars are giving back to the community.
“Maybe you decide that you want to support local businesses or people in your family and friends circle who are struggling,” says Castro. “There are so many creative ways to think about it.”
It’s hard to find a magic number to spend on the holidays that works