Best value at Christmas
I’m going to tell you how to make Christmas great, and get more value from every dollar you spend on it.
Christmas is an unalloyed joy for very few people.
Each of us knows what we like, and don’t like about it.
And yet, we seem incapable of ditching the stuff we dislike, and only doing the stuff we love.
Here’s my list of happy things on Christmas Eve/Day: Cook a turkey, ice a cake with the kids, play board games, set fire to a Christmas pudding I made last year, eat at least two home-made mince pies, have relatives to stay, put up a real Christmas tree.
But, oh, if Christmas could end there.
What gets a lot of people down about Christmas is the financial pressure, especially around buying presents.
I firmly believe that if the whole nation decided to spend half as much on presents, and refocus Christmas spending on having a nice day, we’d all experience a happiness lift. Keep presents modest Spend on experiences for happiness
Never borrow to buy presents
Giving is an expression of love, but science clearly demonstrates that spending on experiences (like a nice family Christmas meal) brings more happiness than spending on things.
And retaining more money, while owning fewer things, also creates happiness.
A lack of emergency saving is a major nerve-racker for many people.
Research shows having a decent emergency fund makes people feel more secure, and happier.
Going into debt for Christmas will have the opposite effect on a person’s happiness.
When it comes to Christmas presents, focusing your spending is a good idea.
First, consider leaving the adults out.
Grown-ups can afford to buy the things they need.
If I manage to finally get no presents this year (I have asked everyone not to bother), I won’t be disappointed.
If you have to buy adults a present, the happiness rule of spending implies you should buy them an experience.
Second, if you buy presents for the children, focus on quality over number. There is a very clear law in economics of diminishing returns when it comes to wealth.
An economist (Alfred Marshall, 1890) might express it like this: ‘‘The additional benefit a person derives from a given increase of his stock of a thing diminishes with every increase in the stock that he already has.’’
At Christmas, parents should expect a decreasing amount of extra happiness for each new gift pushed their children’s way.
Economists have also identified something that will come as no surprise to anyone.
A large proportion of Christmas presents are basically unwanted.
Being economists, they had a fancy term for it. They called it the ‘‘deadweight loss’’ of Christmas presents.
This was the proportion of money spend on Christmas presents that was wasted on stuff that was not wanted. It could be as high as a third. It’s another reason to buy less, but to buy better.
Giving is love but experiences, not things, make people happiest.