Ho-Ho-Ho Overspending

Editor’s Note: Today, we’re sharing one of Jared's most popular essays. With the holidays fast approaching, it's a good time to remember that the best gift you can give is financial independence.

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Relationships can go sideways because of wonky attitudes about money.

When it comes to Christmas, a lot of people have unrealistic expectations, especially little kids. Disappointing them is tough. But sometimes it’s necessary.

It’s pretty common for someone who makes $50,000 a year to spend $7,000 on Christmas. Of course, they’re not paying $7,000 in cash. They charge it to a credit card. So, they’re really spending $14,000 when you tack on interest.

That easily wipes out their savings for the year—and then some. So, they never get ahead. Then they wonder: Why are we falling further and further behind?

Overspending on Christmas is one of the reasons.

It Doesn’t Take $7K to Brighten Someone’s Day

Don’t get me wrong, I love to give gifts. I might stop by the jewelry store and buy something for my wife in August, just to do it.

But I de-emphasize Christmas and birthdays. It’s easy to be generous on special occasions. But it’s hard to be generous all the time.

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Take tipping, for example. I randomly give big tips, especially in tip jars. Dropping a twenty in a tip jar is one of my favorite things to do. Those small gestures can really brighten somebody’s day.

As for family, gifts don’t need to be expensive or complicated to make an impact.

I had a cat named Otto for 15 years. He was the best cat of all time. The year he died, my wife gave me a picture frame with three pictures of Otto. It probably cost her 25 bucks, but it made me cry. It was one of the best gifts I’ve ever received.

So really, you don’t need to spend $7,000 to brighten somebody’s world. It’s not about the money.

The Kids Will Be Fine

If Christmas is a big deal in your house, then you have to manage expectations. Maybe you say, “You might only get two gifts this year.” Explain that you’re saving money or paying off debt. Whatever the reason, spell it out.

There are two important things to keep in mind here. One, if you give fewer or cheaper gifts, you’re going to disappoint people. Not everyone, but some people. Two, you have to do it anyway.

Frankly, you have to be “selfish.” I know that’s a dirty word. People don’t like to think of themselves as selfish. But if you’re up to your eyeballs in credit card debt, and you don’t see a way out, piling on seven grand worth of Christmas presents isn’t going to help.

In fact, it’s going to make the problem worse. So, you need to act in your own interest, spend less on Christmas, and pay down that debt.

The kids really will be fine. They won’t need a lifetime of therapy if you spend less on Christmas. They’re still getting gifts. It’s not like you’re wrapping a jar of peanut butter and sticking it under the tree.

But you need to communicate why they’re getting a little less this year. Tell them you have to climb out of a hole, and you need everyone’s help doing it.

The Trouble with Generosity

A lot of people get in financial trouble precisely because they’re generous.

I have a family member who’s expected to buy plane tickets for a whole entourage when he travels. I don’t know why that expectation exists, but it does.

When there’s an expectation, you risk letting people down. You don’t want to let people down, so you end up paying for six plane tickets and six hotel rooms.

If you can’t afford it, you just have to say no. Otherwise you’re going to give and give and wind up in debt.

Aim for Financial Independence

Financial co-dependence means you rely on other people and other people rely on you. These people are constantly bailing each other out. It’s not good.

If you’re not financially independent already, that should be your goal. No one should rely on you financially, and you shouldn’t rely on anyone else.

So, be generous this Christmas, but not to a fault. Do that and you’re taking a concrete step in the right direction.

Jared Dillian
Jared Dillian