There are many money traps we have to look out for in life: Getting into debt, an elaborate wedding, blindly signing for loans and more. But this holiday season, the money traps will come from your own generous and giving nature and how it can get the better of you, and your wallet. Can you see yourself starring in any of these costly holiday roles? (For related reading, also take a look at Host A Holiday Party For Less.)

IN PICTURES: 5 Money-Saving Shopping Tips

The Excessive Homemade Gifter
If you are planning on giving a thoughtful gift of homemade baked treats this year, be careful of feeling like it's just not enough. There's no need to rush out and buy a "real" gift. Although it may only cost you a fraction of the retail price to make your own chocolates, it doesn't mean they are any less worthy. Consider the time, labor and love that goes into making those treats to be worth more than just buying a box of chocolates for friends and family, not to mention that homemade usually tastes better, too.

To put it in perspective, make a list of what you plan to give along with the time spent in baking, crafting and wrapping those treats, and step back to look at what it'll cost you in time and money.

The Too-Fair Gifter
It's a wonderful trait to always want to treat everyone on your list equally, but it can get out of control when you try to be too fair. For instance, if your son asked for a single, costly present this year, but your daughter asked for a bunch of lower-priced items, don't start trying to buy more for your son because you feel like your daughter has more. Set a budget for each child stick to it, even if it means some one only receives one present.

Fair gifters also fall prey to feeling guilty over saving money by buying gifts on sale, so they end up spending over budget to equalize the gift giving. Instead of spending the money, consider putting those savings into a future education savings account.

IN PICTURES: 5 Ways To Control Emotional Spending

The Surprised Gifter
You should have expected it - your new neighbors showed up with an unexpected gift for the whole family, but you are caught totally empty-handed. In an effort to reciprocate their goodwill, you rush out to buy yet another gift which is the straw that breaks your holiday budget's back. Think about it this way: if there wasn't an established tradition of gift giving, how could you have anticipated it? Cut yourself some slack and next time, set aside a slush fund for those unexpected gifts, or add your neighbors to next year's budget.

Another good way to handle these surprise gifts is to keep a spare gift set aside specifically for these occasions. If you end up with these gifts still in the cupboard at the end of the holiday season, you can reuse them next year, or gift them to yourself as a reward for staying within your budget.

The One-Up Gifter
It all started so innocently with one small gift of homemade cookies that your neighbors reciprocated with a very fancy bottle of wine, which made you want to buy something even nicer the next year to thank them for that bottle of wine, which they returned with a gift certificate for a swanky restaurant in town. This kind of gift giving tends to spiral out of control, because neither of you seems to want to stop. Unfortunately, this will never go back to just gifting each other with homemade cookies, but you can give yourself some financial relief by giving the same gift you gave last year. This should send the signal that you've hit your limit.

Hopefully this hasn't escalated to giving away exclusive concert tickets or expensive trips, but catching the gift-giving snowball before it turns into an avalanche will probably relieve both parties' wallets. You could always just invite your neighbors over for a great meal rather than buying them something, or maybe talk to them about setting a budget this year.

The Bottom Line
We all want to do the right thing, and when someone has been kind to you, we can't help but want to reciprocate to show how grateful and appreciative we are. There's nothing wrong with that, just keep that generosity in line with your budget. (For an interesting read, be sure to also check out 10 Ways To Make Money This Holiday Season.)

Find out what happened in financial news this week. Read Water Cooler Finance: GM's Dramatic Return.

Related Articles
  1. Home & Auto

    4 Areas to Consider Roofing Material Types

    Roofing your home is very important, that’s why you should choose a roof specifically designed to handle your area’s climate.
  2. Budgeting

    The 5 Most Expensive States for Child Care

    To get a better sense of how child care costs can fluctuate, here's a look at the costs of child care across the country.
  3. Home & Auto

    Looking To Invest In Home Improvements?

    Some home improvement projects could cost you more to complete than they’ll pay out in equity. So, here we show you the worst projects to avoid.
  4. Fundamental Analysis

    Understanding the Internal Rate of Return Rule

    The internal rate of return rule is a popular method used to compare investments or projects.
  5. Home & Auto

    Are Home Inspections Worth It? - Price vs. Value

    If you’re wondering whether home inspection is worth the investment, the following information will help you decide.
  6. Budgeting

    How to Defray Long-Term Care Expenses

    Here's a handful of options on what you can do to defray long-term care expenses.
  7. Budgeting

    The True Cost of Home Caregiving

    Caring for eldery family in-home might be unavoidable, but most caregivers don't realize the true cost of doing so.
  8. Budgeting

    Is Level Money the Perfect Budgeting Tool?

    Here’s a detailed review of how Level Money works and whether it could be the perfect tool to help you budget.
  9. Economics

    Explaining Budget Surplus

    Budget surplus is an economic term describing a situation where revenue exceeds expenditures.
  10. Savings

    Millennials' Money Habits: How to Help

    Millennials gleaned much of their financial savings habits from their parents. Here's where they could use some help.
  1. Internal Rate Of Return - IRR

    A metric used in capital budgeting measuring the profitability ...
  2. Debt Consolidation

    The act of combining several loans or liabilities into one loan. ...
  3. Personal Spending Plan

    Similar to a budget, a personal spending plan helps outline where ...
  4. Fudget

    A falsified statement of income and expenses. A fudget or "fudget ...
  5. Capital Project

    A long-term investment made in order to build upon, add or improve ...
  6. Haggle

    When two parties involved in the purchase of a good and service ...
  1. How does a bank determine what my discretionary income is when making a loan decision?

    Discretionary income is the money left over from your gross income each month after taking out taxes and paying for necessities. ... Read Full Answer >>
  2. Is the retail sector also affected by seasonal factors?

    Generally speaking, the retail sector is highly seasonal. Almost invariably, sales in the retail sector are highest in the ... Read Full Answer >>
  3. What is the range of deductibles offered with various health insurance plans?

    A wide range of possible deductibles are available with health insurance plans, starting as low as a few hundred dollars ... Read Full Answer >>
  4. How do I know how much of my income should be discretionary?

    While there is no hard rule for how much of a person's income should be discretionary, Inc. magazine points out that it would ... Read Full Answer >>
  5. What proportion of my income should I put into my demand deposit account?

    Generally speaking, aim to keep between two months and six months worth of your fixed expenses in your demand deposit accounts. ... Read Full Answer >>
  6. How do I use the rule of 72 to estimate compounding periods?

    The rule of 72 is best used to estimate compounding periods that are factors of two (2, 4, 12, 200 and so on). This is because ... Read Full Answer >>

You May Also Like

Trading Center

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!