Personal Finance

The annual expense almost everyone forgets to budget for

Key Points
  • The holidays are looming, and with them all the people you may want to acknowledge with a cash thank you.
  • Seasonal tips can mount up, whether you live in a suburban gated community or a city apartment building with doormen and porters.
  • Now is a good time to start setting aside some cash so you won’t be slammed with a big outlay on top of the rest of the holiday spending.
Steve Prezant | Image Source | Getty Images

Halloween is less than a month away. ­­­We are in the holiday sluice run, facing down pumpkins, turkey, lights and gifts.

And tips. So many tips.

As an annual event, there's plenty of time to plan for this expense. Yet very few do.

Most people absolutely do not set aside money for seasonal tipping, says Brent Weiss, a certified financial planner and head of planning at advisory firm Facet Wealth. In fact, they don't even always plan for gift-giving to friends and family. "There's a reason there's so much last-minute shopping, and people using credit cards to buy gifts," Weiss said.

All financial outlays – not just gifts, but tips – should be planned and budgeted for.

Define your purpose. "Are you giving someone a gift or tip to thank them for previous work?" Weiss asked. "Do you want to motivate them to continue giving good service?"

Holiday budget
Holiday budget

Start with a list of everyone you'd like to acknowledge in some way. Then, find ways to make your tips personal.

Focusing on the word "tip" makes people think more of money, Weiss says, rather than a gift. But a personal note means so much more and conveys your appreciation when used along with something more personal.

"It doesn't have to be monetary," Weiss said. "A simple thank-you note or bottle of wine can go a lot further than $20. It is more meaningful and has true impact."

If you know the recipient likes wine, you can pair the note with a wine shop gift card. "These personal touches go a lot further than cash," Weiss said. "If they don't remember the tip, what is the point of giving?"

Another way to make sure your gift isn't lost in a flood of holiday tips: Give it earlier or later than the December holidays. "People remember it," Weiss said.

Don't feel obligated to do all your tipping at the end of the year. If you're tipping someone whose work is seasonal, such as yard work or pool cleaning, it makes sense to tip in the summer.

Don't tip your kid's teachers. "While holiday and end-of-year gifts for teachers are traditional in many places, tipping is not," said Randi Weingarten, president of the American Federation of Teachers.

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Instead, Weingarten says personal gifts from students and parents can be very meaningful. Always appropriate: a heartfelt, handwritten thank-you card. Many school districts have regulations on what teachers can't receive. Many allow for class gifts and group donations from families.

As a cash guideline, Weiss says he uses a simple rule. Either give someone a cash amount equal to their regular service – whether a monthly dog groomer or weekly landscaper – or a flat $100.

Keep in mind the real purpose behind tipping: a way to acknowledge someone's efforts during the year.

It's also OK to shorten your list, Weiss said. "Find the people you have a meaningful relationship with and give a personal gift that will have more impact."