Personal Finance

How Much Holiday Generosity Is Too Much? When Gifting Threatens Your Retirement

Joey Frenette

Published: December 27, 2024 11:00 am

Excessive generosity around the holiday season tends to be a good thing, provided you know where to draw the line. Of course, numerous gift-givers likely wouldn’t think twice about paying up hand over fist for a good if it’s for someone else. And while such generosity is justifiable if you’ve got the means to fit things into the monthly budget, excessive generosity, if left unchecked, could also set someone back significantly, especially if there’s consumer debt involved.

In this piece, we’ll look at the potential pitfalls of giving into social pressures and spending outside of your means. While going into debt for gifts over the holiday season may entail less guilt or even satisfaction than if someone were to make a big splurge on themselves, the financial aftermath still needs to be dealt with.

Responsible generosity is key during the holidays!

While nobody wants to be outclassed over the holidays, I do think that financial priorities should come first, especially for those who are like the many Americans living paycheck to paycheck. Indeed, if you’ve got very limited financial wiggle room, the holiday gift-giving season could prove detrimental. And you may even be forced to tap into your retirement nest egg to make the lofty expenditures to buy the gift you may have promised to someone in your life.

In any case, when you look at the holiday season as a competitive sport of sorts, you could really put a dent in your retirement. Undoubtedly, it’s tempting to want to impress and outdo other gift-givers in a battle for the biggest post-present-unwrapping smile. It’s not easy to not give in to the peer pressure that comes with the holidays. If all you can afford is a little handmade gift while your sibling treats the parents to an all-inclusive vacation, it can be difficult to cope.

Indeed, keeping up with the Joneses is never a good idea, even when it comes to giving gifts. As always, ask your financial advisor for tips of saving and spending wisely as we head into the pricey holiday season.

How much is too much?

While I’m certainly not against spending on meaningful gifts that you know for certain will bring joy, I do think that one has to know their financial boundaries. But just how much is too much to spend on someone?

There’s no set golden rule here. And if you’re in a good spot financially, you may not even need to consider budgeting around the holidays.

That said, if you’re under significant financial pressure heading into the holidays, it can be tempting to put it all on credit and worry about the matter later. Personally, I believe that nobody should even consider going into debt or withdrawing from one’s 401k to fund gift purchases. Not when there are so many alternative ways to show people you care.

It may sound a tad chiché, but it’s the thought that really counts when it comes to gifts given during the holiday season.

There’s more to the holidays than excessive consumer spending.

Personally, I think there’s no shame in being frugal with the gifts in any given year, especially if you’re already in debt. A gift receiver probably wouldn’t feel all too great if you had to overextend yourself financially to make a purchase.

Perhaps going light and frugal for this year’s holiday season with the intention of being more generous next year is an option worth considering. Indeed, every holiday season doesn’t have to match or top the last, especially if you’ve been hit with harder times. When personal economic circumstances are good, then go ahead and be generous. However, if your only option is credit, perhaps there are out-of-the-box ways to show your generosity this year.

A visit to the local festive market and other experiences are low-cost (or even free) ways to enrich the holiday experiences with loved ones without having to impair your financial health. At the end of the day, that’s not what the holidays are about!