Can you really afford to buy that gift?

Can you really afford to buy that gift?

You'll often hear people refer to "creating a budget for the holidays".  What this usually refers to is setting a limit, and allocating your total limit between gifts, decorations, food, etc.

However, it is very important that your total "holiday budget" is set based on what you can afford. If you don’t have a budget for your overall financial situation which takes into account your income and all of your expenses throughout the year, it’s hard to know what you can afford to spend on gifts.

Read on to find out why it’s so important to prepare an overall budget and what to consider when deciding how much to spend.

Why You Should Budget For Gifts

  • Preparing a budget that incorporates all of the things you plan to spend money on throughout the year provides an opportunity to decide what you can afford and what you cannot before you spend the money, so that you know you will have enough funds to cover everything. Without a budget, people tend to make spending decisions based on the cash available in their account or the credit limit available on their credit cards. This can leave them strapped for cash or without available credit when another bill becomes due down the road. This is one of the reasons that insolvency filings tend to increase in January each year – people have spent more than they can afford over the holidays, leaving them unable to deal with bills and service debts in the new year.

  • Shopping for gifts for a loved one can be a very emotional process, particularly for those for whom gift-giving is their way of showing love. However, making financial decisions while in a state of high emotion tends to end in poor results. Setting a budget (or a limit) for gift spending can help guide you so that you can avoid becoming attached to a particular gift idea that is more expensive than you can afford. It can also be a measuring stick for when to stop shopping for gifts, particularly around the holidays.

  • When preparing a budget for the first time, or even adjusting your budget after something major has changed in your life, it’s often an eye-opener. Many people don’t realize until they prepare a fulsome budget just how little they can realistically afford within their income level. Or they are astounded at how much their usual spending adds up. Often, the first draft of the budget doesn’t look very good: you may find your plan has you spending more than you make, or leaves little room for saving. Once this reality check sets in, many people realize that they have to reduce their spending plans in some areas. Quite often, spending on gifts is an area that gets adjusted.

How To Decide What To Budget For Gifts

When preparing a budget, it's unusual to be able to fit everything you could possibly want in it. The process usually involves considering (or reconsidering) your priorities in order to decide what makes the cut and what doesn’t.

Depending on the size and closeness of your family, and your family traditions, gift-giving may be a higher or lower priority for you compared to others. This makes it a highly personal decision.

However, there are a few guidelines to consider:

  • The first priority should always be your “needs”. Needs are things you can’t live without, like shelter and food. No matter how important gift-giving feels to you, it probably isn’t a “need”. Make sure you can cover all of your needs before you even consider adding gifts to your budget.

  • For every dollar you budget for gifts, there will be a trade-off. Perhaps you’ll have to spend less on fun things like restaurants or entertainment. Or it will take you longer to save toward your financial goals. Maybe you’ll even have to cut back on some of your basics, like groceries or your cable bill. Thinking about what you’ll have to give up to spend money on gifts will help clarify your priorities.

  • There may be other, less expensive, ways to show your love. Homemade gifts or spending more time with someone may be an excellent substitute (or partial substitute) for a store-bought item. In the vast majority of cases, if your loved ones knew you were taking on debt or foregoing spending on needs or other priorities in order to give them a gift (or maintain your prior level of spending on gifts), they would gladly accept an alternative.

As a Licensed Insolvency Trustee, I speak with people every day about their finances. When I’m helping people create a budget, they often struggle with how to treat gifts. Most people consider gifts a high priority, but they often end up realizing that they need to limit their spending in this area. Without a budget, you may overspend and put your financial situation at risk. Therefore, it is important that gifts be included in your budget.

Charla Smith & Company is a Calgary-based Licensed Insolvency Trustee, serving the southern Alberta region. We regularly help individuals navigate their options to deal with overwhelming debt. If you would like a free, no-commitment consultation to review your options, contact us.

Frequently Asked Questions

There are many resources for those looking to get started on budgeting. Not-for-profit organizations that assist those with low incomes often provide budgeting workshops. Financial advisors will often help with budgeting, and there are a myriad of resources on the internet. But keep in mind that anyone who is trying to sell you goods or services can be biased in their advice, even if unintentionally. 

A safe resource for budgeting is the information provided by the Canadian government's Office of the Superintendent of Bankruptcy, which you can find here. This is the basis for the financial counselling that Licensed Insolvency Trustees provide to those who make an insolvency filing, and we've found it to be very helpful to those we counsel.

If you're not sure whether budgeting will solve your financial difficulties, reach out to us to discuss your situation.

It's never too late to prepare a budget to figure out how to cover all of your expenses and service your debts. With a plan, you might be able to get things under control. However, if your debt is overwhelming you may need to consider other options for dealing with it. In that case, the best resource is a Licensed Insolvency Trustee, who will review your situation and talk to you about options. Contact us for a free consultation.

Reach out to us. You can make an inquiry directly from our website by clicking here, or you can call or text us at 1-403-899-3890. We will respond quickly, and work with you to find a good time for the meeting.

Licensed Insolvency Trustees (or LITs) are the only people who can provide bankruptcy or Consumer Proposals as an option for dealing with your debt. They are uniquely qualified to provide these services and give you advice about your debt. For more information, see our blog post: What is a Licensed Insolvency Trustee?


With our experience and our caring approach, we will help you find the best option for debt relief based on your unique situation - from advice on talking to your creditors to a consumer proposal or bankruptcy, and everything in between. We are here to lift the burden caused by overwhelming debt. 

Contact us today at 1-403-899-3890‌ for a FREE, no-commitment meeting, and let us guide you to regaining your financial footing.

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