Kip Tips


Better Ways to Spend
Your Holiday-Gift Budget

Cameron Huddleston

You and your significant other could agree not to give each other presents and use the money to improve your finances instead.



I've written a lot lately about ways to save on holiday gifts. However, I've neglected to mention the biggest -- and most obvious way -- to save: give fewer gifts.

I'm not suggesting that you be a Scrooge. But you might be able to limit the number of gifts you give to family members. My husband and I have decided not to give each other anything we have to purchase in a store or online this year. As much as we both LOVE opening presents, we know our money could be put to better uses.

Americans are expected to spend, on average, about $387 on gifts for family this year, according to the National Retail Federation. Say each spouse plans to spend about $100 on his or her significant other -- that's $200 you could keep in the bank this year. Or just think of the smart ways you could use that money.

1.Pay down debt. Whether you've racked up holiday debt or have a balance lingering on your credit card, $200 to help make a dent. Use our tool to find out what it would take to pay off your credit-card balance.

2.Boost your emergency fund. You should have enough cash to cover several month's worth of expenditures in case you lose your job or disaster strikes. See How Much Cash You Really Need.

3.Contribute to your retirement account. Your account balance likely has recovered from the bear market, but help it even more with an additional contribution this year. See how much your account would grow with our tool.

4.Contribute to a 529 college-savings plan. You'll thank yourself for this one when the college tuition bills are due. See our picks for the best 529 plans.

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5. Open a roth for your kids. If you're children have income from a job, you can open and contribute to a Roth IRA for them. Learn the rules.

If you and your significant other decide not to buy each other anything this year, don't think of it as depriving yourselves of a holiday tradition. You're improving your personal finances, which is a valuable gift. And you always can offer non-monetary gifts, such as several hours of watching the kids so your spouse can have some alone time. I'd take that over a new sweater or necklace any day.



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