Choice Rewards World Mastercard®
Learn More
Terms Apply
Paid Placement
No-fee balance transfer offer plus a welcome bonus valued at $160!

Our top picks of timely offers from our partners

More details
Rocket Mortgage
Learn More
Terms Apply
Rates could continue to rise - look into refinancing with one of our top picks.
OnDeck
Learn More
Terms Apply
A+ rating with the Better Business Bureau and our top pick for same-day funding
Earnest
Learn More
Terms Apply
Private student loans with no fees, flexible payment options, and cosigners can apply by phone with expert help.
CIT Bank
Learn More
Terms Apply
Earn 15x the national average with a Savings Connect account. Member FDIC
Select independently determines what we cover and recommend. We earn a commission from affiliate partners on many offers and links. Read more about Select on CNBC and on NBC News, and click here to read our full advertiser disclosure.
Resources

How much should you spend on holiday shopping? A financial planner weighs in

This might be the year to get creative on low-cost gifts, says a Mint financial planner.

Share
Getty Images

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."

Use your budget as a barometer

It's hard to find a magic number to spend on the holidays that works for all budgets, says Castro. "Everybody is so different financially, so what I tell people is to determine how much you can realistically afford."

Ideally, you should set up a holiday savings account ahead of time. A high-yield savings account, like Marcus by Goldman Sachs High Yield Online Savings and Ally Online Savings Account can earn you a bit more cash than a traditional bank. You can even use a budgeting app, such as Mint, to set goals and track your progress throughout year.

But if you've had to tap into your savings account this year to weather the coronavirus pandemic, you should adjust your budget accordingly.

"Ask 'What can I eliminate so that I could save these funds or use these funds to pay for some gifts?'" advises Castro. "Maybe it's only $300," she says, and that's OK.

In fact, it's preferable to getting into credit card debt.

"If you have no savings, and you can't afford it out of your monthly budget, then this is the year that you're going to do something creative and fun," says Castro. "Now, more than ever, people are understanding."

Don't miss:


Information about Marcus by Goldman Sachs High Yield Online Savings has been collected independently by Select and has not been reviewed or provided by the banks prior to publication. Goldman Sachs Bank USA is a Member FDIC.

Editorial Note: Opinions, analyses, reviews or recommendations expressed in this article are those of the Select editorial staff’s alone, and have not been reviewed, approved or otherwise endorsed by any third party.
First Tech Federal Credit Union
Learn More
Terms Apply
Paid Placement
Borrow up to $50K - flexible terms up to 84 months, no origination or application fees, and no payments for up to 45 days
Find the best savings account for you
Learn More
Terms Apply
Check out our savings marketplace to compare options or read about our top picks