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. Budgeting

    How To Save Money When Moving

    Moving doesn't have to be as expensive as you think. Here are some great ways to save money on moving costs.
  2. Budgeting

    The Hard Way We Pay For Convenience

    Convenience is a luxury. However, any cost-conscious individual should be aware of these ridiculous ways we pay for convenience and how to avoid them.
  3. Budgeting

    How to Cost Effectively Spend on Baby Clothes

    Don't let your baby's wardrobe derail your budget. These top tips help you to save money and spend wisely on baby clothes.
  4. Personal Finance

    College Students are Failing Financial Literacy

    Financial trends among college students are a cause for concern, prompting a renewed emphasis on financial literacy.
  5. Budgeting

    6 Cost-Effective Tips for Raising Your First Child

    The excitement of welcoming your first child to your family shouldn't prevent you from making good cost-effective decisions.
  6. Budgeting

    5 Ways to Date on a Budget

    Dating on a budget doesn't have to be boring. Try these 5 tips to find the best dates on a budget.
  7. Budgeting

    7 Kids Items You Should Never Buy Used

    Buying secondhand items is a great way to save money, but these seven kids items should not be bought used.
  8. Investing

    10 New Apps That Help Budget For Expensive Cities

    From platforms for saving money to those that account for side jobs, mobile apps are changing spending habits and income generation in urban areas.
  9. Budgeting

    How Cooking At Home Can Save You Real Dough

    Cooking at home saves time and money but most importantly, it could even help lower future health costs.
  10. Home & Auto

    Why Housing Costs Shouldn't Exceed 30% of Your Budget

    Financial experts will argue that there’s no problem with allocating 50% of your net income to housing, but that barely leaves enough money for living comfortably. Reducing housing expenses to ...
  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!