3 Tips for Your Holiday Gift Budget -- Savings Experiment

The holidays are almost here, and that means gift-giving season is right right around the corner. Unfortunately, that also means buying expensive presents for friends and loved ones. Luckily, there are ways to buy that perfect gift without unraveling your savings.

First, when it comes to buying gifts, figure out how much you can afford. Financial advisers suggest spending no more than 1.5% of your annual take-home income during the holiday season. For example, if your annual take-home income is $50,000, just multiply $50,000 by 0.015 and you'll see that your holiday budget should be $750.

Now that you have a budget, think about who to spend that money on. One effective way to determine who to focus your finances on is by using a three-tiered system. The first tier is for family. If it's within your budget, exchange bigger ticket gifts with each person in your immediate family. The second tier is for friends. Try doing a single-family gift for your friends, like movie tickets or a fun board game. And finally, the third tier is for neighbors and co-workers. For a nice touch that doesn't cost too much, bake them homemade goods or give them handmade cards.

Lastly, to make sure you don't overspend, start shopping before you feel festive. The best time to do your holiday shopping is from October 1 to December 1. The closer people get to the holidays, the more they spend on gifts.

Before you start your holiday shopping, remember these tips. By creating a smart budget, you can spread the holiday cheer without being a Scrooge.

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