How much should you spend on Christmas gifts given your income?

Your house might be decorated with carved pumpkins and creepy cobwebs, but before you know it, it will be Christmas again.

And now is the right time to hash out your holiday gifts game plan, personal finance experts say.

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There are two reasons for that, Scott Hannah, head of the Credit Counselling Society, told Global News. The first is that you’ll need some time to draw up a budget. The second is that tackling your gift list with plenty of lead time means you’ll have more opportunity to snatch deals, including on Black Friday and Cyber Monday.

Buying early also means you can pick the slower – and cheaper – shipping options without worry.

Above all, said Hanna, avoid last-minute “panic shopping,” when your mindset is likely to shift from “what can I afford?” to “I need to get something.”

A reasonable gift budget? Around 1 per cent of your gross annual income

The starting point, said Hanna, should be what you can afford, rather than the size of your family and circle of friends.

“It’s important to have some benchmarks around what’s manageable and what’s not,” he noted.

A good rule of thumb for middle-class Canadians is to keep the gift budget around one per cent of their pre-tax income, he suggested.

The median household income is just over $70,000 in this country, so that would mean spending around $700 on gifts.

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Don’t feel guilty if your budget is much smaller than that, though. Gift aren’t necessities, and there are a lot of variables and discrepancies that would make reasonable spending plans for families with similar incomes look very different, said Hannah.

When you do the math, though, remember that gifts are only a portion of the overall Christmas spending – and not necessarily the largest one.

PwC Canada expects Canadians to drop over $1,500 on average during the holiday season, with gifts accounting for just 41 per cent of that.

Another thing to keep in mind: Wrapping paper and cards also have a cost and can bust your gift budget if you don’t include them.

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There are many ways to craft dazzling gift-wrappings without spending a fortune, from DIY Christmas cards to reusing well-preserved gift bags and ribbons. But that, too, requires a little extra legwork and planning ahead.

Finally, once the Christmas frenzy is over, consider stocking up on discounted cards and wrapping paper for the following year, suggested Hannah.

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Make a list and check it twice

Having an overall spending target is often not enough to make sure you stay on budget, said Hannah. You also should also write down your gift recipients and come up with a dollar figure for each. “Make a list and check it twice,” as Santa would say.

But better yet, make a list and then trim it down, advises Hannah.

“Have a conversation with extended family about what does and does not make sense,” he said.

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You might be surprised to find out that your second-degree cousin is just as eager to ditch the family gifting tradition as you are.

Often, “someone has to take the initiative, and yet everyone is thinking about it,” said Hannah.

And don’t feel obliged to match other people’s price tag. Just because your lawyer uncle got you a $300 kitchen mixer, doesn’t mean you can’t gift him a $20 pair of fancy socks, if that’s what fits your income.

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Use cash or debit

Regardless of how much you’ve decided to spend on gifts this year, consider using cash or debit to pay for it, said Hannah. A thinning wallet or shrinking bank-account balance will help you keep the spending in check.

The worst thing you can do is walk into the holiday season without a plan, whip out the plastic and tell yourself that you’ll just deal with it later.

Every year, Hannah gets to see the after-Christmas debt hangover up close – and it isn’t a pretty picture.

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The number of people who walk into the office seeking financial help soars in January, as the credit card bills start rolling in.

Many will take months to regain control of their finances, he said.

That kind of year-round financial stress just doesn’t seem worth a few days of holiday cheer.