How Much of My Income Should I Spend on Christmas?

Christmas causes many to feel joy about the meaning of the holiday, gathering with family and exchanging gifts. Christmas shopping has become a national pastime for many, as lists are formed, sales sought and crowds expected. When money is tight, the holidays invoke more stress than fun, and the fear of adding to an already overburdened credit card makes some people dread the season. You shouldn't spend more than you can afford, but understanding the percentage of income that many people spend on Christmas gifts can be helpful.

According to personal finance expert Gregory Karp, you should spend no more than 1.5 percent of the annual family gross income on presents. If you have many deductions from your gross pay, you may spend a larger percentage of your take-home wages. When calculating your budget, include all the Christmas expenses, including the tree and decorations, wrapping paper and travel costs, if you are planning a vacation or a trip home over the holidays.

A 2011 survey by Deloitte Development, a financial services corporation, shows that many people spend less than 1.5 percent of their income. The survey found that those individuals whose total incomes are $100,000 spend about $800 on presents. This represents less than 1 percent of wages. For those who make less than $100,000, Deloitte found that spending totaled slightly under $300. Every situation is different, so if you have less income and more expenses one year, you may not represent the national average.

Regardless of how much you spend on Christmas presents, this extra expense can cause a financial hardship if you haven't saved for it. Estimating your holiday spending based on your purchases in previous years can help you save monthly for the amount that you need. After calculating your Christmas budget and how much you must save each month, put money from each paycheck in a separate account and avoid using it.

To keep your Christmas spending down, consider giving gifts that are meaningful, but cost you little or nothing. If you have the ability to make attractive items that others can use or display, the recipient will appreciate the thought and effort. Alternatively, give a certificate for a free service that you perform. If you are a professional, offer your time and services in your industry. Re-gifting -- giving a nice gift that you received from someone else but don't want or need -- may be a solution.