​​
In a Nutshell: You're probably spending more on gifts than you think you are or need to. You can reduce your spending on gifts, allowing you to save and invest more, without really impacting the joy you bring to others. Doing so will set you up for a much better retirement, ensuring that you can bring a lifetime of joy to others. ​​

'Tis the season to spend on gifts

'Tis the season to spend on gifts 

“How much do you or your family spend on gifts in a year?”
Think of your favourite moments from past Christmases. Mine include picking up and decorating a tree, playing "Cards Against Humanity" at a good friend's family get together, and going way back... building a snow fort one particularly good snowy day when that heavy good packing snow came down. If there is a memory of getting a gift, it's buried under all the other memories of good times with family, friends and loved ones. So how important is it that we all go nuts and destroy our finances getting gifts for each other that we probably won't even remember?

I remember being in a theatre around Christmas time when the Interac Debt Nutcracker Toy Store commercial came on a couple years ago. (I put it here so you can see it.) I laughed out loud. I thought it was pretty funny. There weren't many people laughing in the theatre around me. That's when all those surveys I had read about how indebted Canadians are, really hit home. Clearly there's too much debt people have taken on. So much so that they didn't find the commercial funny. Come on, it's a toy bear singing the nutcracker music by only using the word "Debt"! It's funny! It's still my favourite debt related commercial though, and a good reminder to buy with cash instead of credit. Hopefully, if you add that to the idea of buying less, and saving and investing more, you'll be all set for a good retirement.

Now I'm not saying you shouldn't give any gifts at all. Why be so draconian? But if you're not going to remember the gifts down the road, maybe we can de-emphasize the importance of gifts? Maybe instead of bombarding each other with a pile of gifts, with gifts for each person from each person, maybe you can agree among your family to just give one meaningful gift to just one person each. Select the names of who is giving to whom to make sure nobody is left out. Everyone likes getting gifts afterall. And then maybe a little tiny inexpensive thing is ok if you still want to give more on the old pattern of each person giving to each person. Maybe it's also a good time to look at those who don't have much at all, and donate some food, or gifts to a charity for those who don't have much. Involve your kids in that activity so they get an idea of what the world really looks like. (I like adding more each year to the amount I give out in microfinancing to help others help themselves, at Kiva.org  . Once people pay back the financing amount, it can go back out to help more people help themselves in a never ending virtuous circle.) (Maybe this will give you some ideas...  https://www.toronto.ca/community-people/get-involved/2017-holiday-wish-list/  )

The season of gift giving is more than just at Christmas. It's around us all year. There's always some occassion to give gifts throughout the year. If you ask an average person how much their family spends on gifts in a year, the answer is usually, "Oh around $500."

Go ahead, ask yourself. How much do you or your family spend on gifts in a year?

Remember your answer. Write it down. In ink. On a little slip of paper. (For those of you who don't know, we used to carry around these devices that had an app where when you clicked the 'write button' the device would spring forth a nib from which a dark liquid would flow allowing you to make letters, words, sentences and even drawings and art on another device we called "paper"! 'Magic' you say? Perhaps... some felt this writing implement was even mightier than a sword! That's another device I'll describe at another time... but I digress...)  

Ok once, you've written the answer down, put it away and out of sight. Make sure you've written an answer down before proceeding though... Seriously. Write it down now. Go ahead.

... did you write your answer down? Simple question. How much do you or your family spend on gifts in a year? Answered? Ok good, please proceed.

No? You didn't write it down?? (Sigh...please just write it down... HELP ME! help me, help you... help me... help you... help ME... help YOU!)

OK, now hopefully you've written your answer down and tucked it away. If Jerry can't convince you, nobody can.

Now let's ask the question another way... and take the time to write down your answer honestly to each and every one of these questions. You're going to need a lot more paper by the way... or a spreadsheet... really take your time to answer each and every one of these questions honestly and in detail. You may need a coffee for this, or something stronger.

Partner Gifts:

If you have a partner, what do each of you spend on gifts for each other's birthday? 
What do each of you spend on each other for Christmas?
What do each of you spend on each other for Valentine's day? 
If you celebrate an anniversary with your partner, what do each of you spend on each other for an anniversary gift?
If you have a partner and celebrate any other religions, what do each of you spend on each other for Diwali? Hanukkah? Kwanzaa? Etc?
For Easter?

Sibling (brother or sister) Gifts:

If you have siblings, what do each of you spend on each of them for their birthdays?
For Christmas? Diwali? Hanukkah? Kwanzaa? Etc?
For Easter?
Write it down for each sibling.

Cousin Gifts:
If you have cousins, what do each of you spend on each of them for their birthdays?
For Christmas? Diwali? Hanukkah? Kwanzaa? Etc?
For Easter?
Write it down for each cousin.


Aunt Gifts:
If you have aunts, what do each of you spend on each of them for their birthdays?
For Christmas? Diwali? Hanukkah? Kwanzaa? Etc?
For Easter?
Write it down for each aunt.


Uncle Gifts:
If you have uncles, what do each of you spend on each of them for their birthdays?
For Christmas? Diwali? Hanukkah? Kwanzaa? Etc?
For Easter?
Write it down for each uncle.

Children Gifts:

If you have kids, what do each of you spend on them for their birthdays?
For Christmas? Diwali? Hannukkah? Kwanzaa? Etc?
For Easter?
What do each of you spend on buying gifts on behalf of one child giving a gift to the other child for birthdays, Christmas, etc?
Write it down for each child.

Niece and Nephew Gifts:
If you have nieces and nephews, what do each of you spend on each of them for their birthdays?
For Christmas? Diwali? Hanukkah? Kwanzaa? Etc?
For Easter?
Write it down for each niece and nephew.


Dad/Step-Dad/Father-in-law Gifts:

What do each of you spend on your Dad's birthday?
Father's day? 
Christmas gift? Diwali? Hanukkah? Kwanzaa? Etc?
Anniversary gift to parents?

Father's day gift that yo​u buy for your partner if your partner is a father?
Father's day gift that you buy on behalf of your kids for your partner if your partner is a father?

Gifts each of you buy on behalf of your kids to give to their grandfathers? Greatgrandfathers? Etc...

Mom/Step-Mom/Mother-in-law Gifts:

What do each of you spend on your Mom's birthday?
Mother's day?
Christmas gift? Diwali? Hanukkah? Kwanzaa? Etc?
Anniversay gift to parents?

Mother's day gift that you buy for your partner if your partner is a mother?
Mother's day gift that you buy on behalf of your kids for your partner if your partner is a mother?

Gifts each of you buy on behalf of your kids to give their grandmothers? Greatgrandmothers? Etc...

I hope you're still writing down all your answers to each of those questions. We've got just a few more to go.

Gifts to other people:

If you've got friends, chances are you buy gifts for your and your partner's friends, maybe at Christmas, maybe on their birthday, maybe on other occassions, write it down.

If you've got kids or know people with kids, chances are you go to other kids birthday parties. What do each of you spend on giving gifts to other people's kids? On buying gifts on behalf of your kids to give to other people's kids? What do you spend on other kids that are friends or cousins of your kids?

What do each of you spend on giving gifts to colleagues? Neighbours?
What do you spend on sending out Christmas cards?
What do you spend on giving gifts to the partners of your siblings, cousins, nieces, nephews, friends, colleagues?

Special occassions:

What do you spend on throwing your children's birthday parties? Coming of age parties?
What do you spend on not just the gifts but all the accoutrements that go with it? That Spiderman Birthday Cake? Those streamers? The loot bags! My god the loot bags! (Appropriately named!) That hall you rented? That performer you hired? That clown? That princess? That face painter? That terrible magician? (It was in the hat the whole time!!!) Keep writing your answers.

What do you spend on decorating your home for your festive holiday? Christmas, Diwali, etc...

What do you spend on dressing up yourself and the kids for Halloween? 
What do you spend on candy for Halloween? For pumpkins? For blowup ghosts you put outside?
What do each of you spend for Thanksgiving feasts?

What do each of you spend on house warmings?
What do each of you spend on baby showers you get invited to?
What do each of you spend on giving gifts for newborn babies?
What do each of you spend on bachelor or bachelorette parties you get invited to?
What do each of you spend on wedding gifts?
What do each of you spend on bottles of wine you bring over as dinner guests?

What do each of you spend on buying gifts for other people when you travel whether for friends, coworkers, or for your kids or for your partner or family members?

What do each of you spend on buying gifts for no occassion at all, but because "oh so and so will like this!"?

Do some of you buy gifts for your pets? Ok throw in that number too. What do you spend on gifts you give to your pets? (sigh...)

OK, if you can think of any other gift giving occassion that I haven't thought of, write down those gift expenditures too.

Don't forget to include the cost of gift wrap, cards, ribbons, gift bags, tissue for each and every one of those gifts. And if you send or give flowers on special occassions, include that too.

Now add it all up! No really... don't shy away from this because you're scared to see the answer, add it all up. Get out your calculator app if you have to. 

What does it add up to? Don't go back and try to fudge the numbers to make it less, you were being honest remember?

Do you need to sit down?

Go ahead, sit down.

While you're sitting down, think about this. That total number you see in front of you... that's just in one year. You do that every year.

...

I bet the number you get after going through all those questions and answering honestly, is much much higher than the answer you wrote down in ink when I first asked "How much do you or your family spend on gifts in a year?". Go ahead, pull out that little slip of paper you wrote your answer on. How does it compare to the final tally? Do you really think you should be spending that much money on gifts?

Now I am not asking you to end all gift giving, nor am I trying to make you feel sad. I'm not trying to ruin Christmas, even I'm not that bad. Though I'm asking you to spend less, I'm certainly not the Grinch. You see I'm just trying to save your finances from a dreadfully awful pinch. "But people like gifts", you say, and I know that's true. But what warms your heart, when the gift giving is through? Maybe Christmas, I think, doesn't come from a store. Maybe Christmas... perhaps... means a little bit more?

I like giving and receving gifts just like the next person. I am just advocating that we come to our senses and realize that really the greatest gift of all is spending our time with people we care about. (Maybe that's what Whitney should've sung about.) Giving of ourselves to others is really the gift. Sometimes supplementing that with a little gift is nice. It could be a bought gift or a made gift. But the gift shouldn't be the focus.

So back to the gift spend amount you initially wrote down and then after going through each painful gift giving question, the final tally you wrote down. The key thing is to be really honestly aware of the total amount you spend on gifts each and every year. Look at that final tally number... really look at it. 

Now write down how much you save each year for retirement.

Now write down how much you save each year for your kids' education.

Can you really afford to spend the amount you are spending on gifts? How does that final tally amount of money you spend on gifts compare to the amount you save for retirement every year? Are you spending more on gifts than you are putting away for retirement every year? Why?

Being dependent on others in your retirement will not be much of a gift to anyone, so isn't it better to reduce your spending on gifts and make sure you are allocating enough money to your retirement savings? 

Are you spending more on gifts for your kids than you're putting away in a savings and investing account for them through an RESP or otherwise? Why? Who is that helping?

Can you reduce that gift spending number by 10%? By 20%? By 50%? By 75%? Would anyone's true joy really be impacted? If you've taught your kids to value gifts above all else, have you taught them the right thing to focus on when it comes to feeling joy? I remember as kids we would climb into cardboard boxes that appliances came in and roll down hills inside the cardboard box. That's a memory that sticks out much brighter than any toy I ever received. Essentially it was the experience of play not the toy that meant more to us as kids. Play brought us joy. 


Assume you can reduce your annual gift expenditures by an amount you believe you can stick to while still bringing joy to people. What does that mean for your retirement?

For every dollar you save from reducing gift giving each year, assuming you invest it each and every year in a balanced portfolio earning 7% each year and you never touch the investment, letting compound growth do its thing, in 25 years that dollar you save and invest annually will become $63.25.

That means, if you can save and invest $100 each year by reducing some of your gift giving and celebration extravaganza, in 25 years you'll have $6,324.90

If you can save and invest $1000 each year by reducing some of your gift giving and celebration extravaganza, in 25 years you'll have $63,249.04

And if you can save and invest $10,000 each year by reducing some of your gift giving and celebration extravaganza, in 25 years you'll have $632,490.38.

Go ahead, take the amount you think you could save annually by reducing your gift spend and multiply it by 63.25. That's what you'll have in 25 years if you save and invest that same amount for 25 years in a portfolio earning the market average of 7%.

Of course if your investments can outperform the market average of 7% you'll be even further ahead in retirement!

Again, I'm not advocating not buying gifts and not celebrating life. I love to give gifts and to celebrate special occassions. Life is meant to be enjoyed on a daily basis. If all your spend added up is well within your means and you're not loaded with consumer debt, and you don't carry a balance on your credit cards, and you aren't adding debt and you're still saving a good amount for retirement and/or for your kids education, then congrats, you're spending an appropriate amount on gifts.

For those of you who can't honestly say that, I'm just suggesting you become much more aware of what you're actually spending. See if you can reduce your spend on gifts significantly, without reducing the joy you bring to others. I bet if you give of your time, they'll hardly even notice. 

And by reducing your spend on gifts and saving and investing annually, you'll be better set up for a financially sound retirement, letting you be more joyful with yourself and to others.

...And why not treat yourself well by saving for a better retirement? 'Tis the season!


Be a SmarterSquirrel... Save. Invest. Enjoy.


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My favourite commercial against debt.

Lessons Learned:
  • be aware of what you're spending on gifts and special occassions
  • write down each and every big and little amount you spend on gifts for every single person you buy gifts for, for every occassion and add it up
  • ​add in the amount you spend on special occassions for each and every single special occassion and add that too
  • compare your total spend on all gifts annually to your total savings for retirement
  • are you spending more on gifts than you put away for retirement? Does that make sense to you?
  • do you spend more on gifts for your kids than you do for their education savings? Does that make sense to you?
  • every dollar you save annually and invest at the market average of 7% turns into $63.25 in 25 years
  • you don't have to be a Grinch or even a bore, just give fewer gifts and save a little more
  • Give gifts reasonably by making sure you save more for retirement than you spend on gifts in a year, so you can have a happy retirement and give of yourself happily for all your years
  • Try to speak like Dr Seuss every now and then, it's fun

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