Whether gainfully employed or not, if you are a person who relies on your employment for the majority of your wealth, you need to cut spending by 25-30% and begin saving with as much zeal. That is easier said than done, of course. Especially when part of maintaining our social connections includes appropriate social gifting....
Gold is hovering around $1400/ounce; silver is over $30. While that may not mean much to the average person, let me just remind you that gold pricing in late 2008 was around $800/ounce; earlier that year, it was closer to $600/ounce--and had held that approximate value for almost 20 years. The cost of precious metals like gold and silver reflect the innate value in the American dollar; when the cost of precious metals go up, it means the value of the dollar has dropped. You can easily see this for yourself; simply turn to Bloomberg and watch the ticker for about 15 minutes. You'll see that both Canadian and Australian currency is now worth more than the American dollar. To be clear, in 2005, the Australian dollar was worth about .72 cents to the American dollar; that same year, the Canadian dollar was worth .83 cents to the US dollar. While it's good news for both Australia and Canada--Australia seeing an almost 30% increase in the value of their currency and Canada seeing about a 20% increase--it also means the US dollar dropped in value...by quite a lot--an average of 25%. This is why cash is king for Americans in 2011, regardless of your employment status.
Cash will be harder and harder to come by in 2011 and beyond; my economic forecast doesn't see us coming out of our financial slump, realistically, until sometime after 2021. We need every dollar we can get our hands on because our money now falls short by about 25%...and not just when we're in Canada or Australia. It's global.
What does this have to do with social gifting? EVERYTHING.
When the money you earn means about 25% less than it did five years ago, we're not talking about progress--whether you earn $250,000/year or $50,000/year. If you're making $250,000 a year, count your blessings; it's never good when the dollars we earn aren't even valued at a whole dollar, regardless of how much we may or may not earn--but at $250,000 per year, a family of four can still exist quite well. However, if you're closer to $50,000 per year, your dollar needs to be more robust to go further--and that's sadly no longer the case in 2011....
If you were to subtract 25%--the average decrease in the worth of the US dollar--that equates to $12,500 from $50,000. Essentially, grossing $50,000/year in 2011 is equivalent to grossing $37,500/year. But you're still being taxed on $50,000 and today, employees are often responsible to pay for a portion (if not all) of their benefits, like health, dental and vision care. On average, an employee making $50,000/year will lose about $12, 000-$15,000 in taxes and benefit-costs, reducing their take-home salary to anywhere from $35,000-$38,000. Now, reduce that take-home salary by 25%--because the US dollar's worth has dropped that much. What are you left with? $28,200/year...if you pay less for your benefits and your post-tax take-home is $38,000 (from a $50,000/year gross). Essentially, your weekly paycheck--after taxes, after benefits, and after you recognize the reduction in the worth of those dollars--is less than $550/week. To run the average American household including mortgage/rent, car payment/gas/insurance, groceries, and utilities, CONSERVATIVELY costs $3,000/month. But when your $50,000/year salary gets reduced to $550/week, in a four-week month, you're going to fall behind your monthly expenses by a minimum of $600. After a year, you're in the hole by $7,200. If my projections are correct, ten years of $7,200/year will see the average American in debt by a minimum of $72,000. And that's without social gifting.
Americans entered the era of the two-income household about 25 years ago. But 25 years ago, it wasn't always necessity driving that decision, it was greed. Today, it's necessity. Period. Though regardless of necessity, two incomes are not always an option. And this is why the question of social gifting in the 21st century must be answered. If everything is being cut by an average of 25%, than your gifting needs to reflect a cut-back of at least 25%, but more realistically, 50%.
You can't stop social gifting completely; even if you're unemployed, it's unrealistic for you to not give a holiday or birthday gift to a parent, sibling, spouse/partner, or your own child. But that's about it. Your best friend, your co-worker, your mail person, your doctor, your hairstylist, your neice, your child's friend--none should be gifted in 2011. Do they all deserve gifts? Of course! But in an economic shift like we've experienced, NO ONE can realistically gift people outside of their very immediate sphere.
People don't and won't understand. All people feel that their contribution, event or special occassion is SPECIAL ENOUGH for exception. Sadly, that's no longer true. We must work together to bring about mass-recognition of both social dollars AND sense...and soon. Because if we don't, we'll all be greeting 2021 with a lot less social connections, and though some of you may feel that might not be so bad...try getting a job without them.
So how do we accomplish this lofty goal? One of the first things I recommend is very simple: Talk. Or write. Tell the people you care about most that you are cutting back financially. You don't have to offer detailed explanations. Simply let them know that your cards or baked goods or shared plants or vegetables from your garden are just as meaningful...perhaps more so. Invest in good-quality note cards on heavy stock--like Crane. Have them on hand to write out personal messages of birthday wishes, congratulations, etc. You can get about 10 high-quality note cards with lined envelopes for about $12-$16/box. You're spending anywhere from $1.20-$1.60 per note card; with tax and a US stamp, you're around $2.00+/sent note card. The idea behind gifting (which includes tipping) is acknowledgement. It is important to appropriately acknowledge important moments in the lives of our social connections in order to maintain them. Believe it or not, spending an excess of money isn't always necessary in order to accomplish this.
By crafting a brief but meaningful message of acknowledgement, you're doing more than just ordering a gift basket online...all that takes is about 2 minutes and a credit card. I'd much rather get a personal note from a friend or relative, reminding me about some memorable moment in our shared past--what a personal note tells me is that my friend or relative thought about me and my special day at least five days prior to the actual event. My friend or relative not only thought about me, they took pains to find time to think about what to say and write it down. They spent money and time taking that note to the post office. Sending a personal note is often not regarded as a significant social act, when in fact, it is often a greater social gesture than sending something like a $100 gift card.
Another suggestion for gifting is to send a donation in that person's name. And no, not to George Costanza's "Human Fund." Find out the charities your friend, relative, co-worker, or service person supports. Send a letter with your check, asking the organization to recognize your contribution to the person it honors by providing their name and address. Follow up the donation with a personalized note card, telling your friend to expect a letter from their favorite charitable organization. If you would have normally spent $25 on a gift, send a $10 donation. For a $50 gift, send $20. If your gifting was $10-$15, you can send a $5.00 donation. Anything less than a $5.00 donation doesn't make financial sense for you to mail--in that case, simply stick with a personalized note card alone.
There will be times, however, where a note card and/or donation aren't appropriate. So here is a Guideline for Social Gifting in 2011. Gifting-expectations for 2005 will be used as comparison points. No one said this would be easy, but if you need to--point people in the direction of this essay to help explain. Things will get better in ten years, but what happens in between? Hopefully, the following guidelines will help:
-For 2011, money is no longer appropriate given the lack of worth in the US dollar. Purchase an item from the couple's gift registry for no more than $35-$50 for acquaintances; $75-$100 for close family and friends (as a couple--subtract 50% from each figure if you're single). If the wedding is out of town and you're expected to spend one or two nights in a hotel to fully participate in the event, spend no more than $50-$75 as a couple, $25-$50 as a single person. Whether the wedding is at the Ritz-Carlton or a local banquet house, this is 2011...your money doesn't go as far. Lavish weddings aren't your problem or choice. All you can do is attempt to acknowledge the event to the best of your ability. In 2011, that means at least 25% less than it did in 2005. In 2005, the average wedding gift ranged from $100-$250/couple or $50-$125 for a single individual.
BRIDAL/BABY SHOWER GIFTS
-For 2011, again, cash is inappropriate. Spend no more than $25-$30 on an item from the gift registry; if this feels strange or inconsequential to the event--talk to one or two other people and see if you can go in together on a more expensive gift. In 2005, the average bridal/baby shower gift was $50. Guess what? You'll find the cost in 2011 has gone up but your money is now worth an average of 25% less...so adjust your gifting accordingly. If you are (one of) the host(s) of the shower, and have spent at least $25-$50 putting on the event, that is your gift. Write a personalized note card and send it one-week prior to the event explaining this. If you spend more than $50-$100 on a bridal shower, that contribution functions as both your shower and wedding gift if you're single; if you attend the event as a couple, purchase a $50 item from the gift registry with a card.
-Not all birthdays are created equal. Your child will be invited to numerous birthday parties during the elementary and middle school years; your friends will probably celebrate significant birthdays less frequently, maybe once a decade--while close family and friends may exchange gifts on an annual basis. Your child(ren)'s birthday(s) is something you must properly acknowledge each year, along with the birthday of your spouse or partner, siblings, and parents. In 2011, an appropriate gift for your close friends and family is $15 worth of baked goods, or plants from your garden or vegetables/herbs with a personal note, or, a $10 donation with a birthday card. With your children's "friends", you can go broke buying for the frequency of birthday parties in a given year. An appropriate gift for an acquainted-child should be no more than $10. You can find fun DVDs at Target for $5 or watch for sales for things like Matchbox cars or Legos at about $7. Remember, that $10 should include the cost of wrapping and a card. And my other suggestion is to limit the number of parties your child attends to just three special friends in a given year. As your child moves through school, encourage them to find work around the neighborhood like pet-sitting, baby-sitting or doing lawn care and make birthday gifts for their friends their responsibility. In 2005, appropriate birthday gifts ranged from $25-$150, depending on the person and particular birthday. If your friend was turning 50, you might have splurged. In 2011, no one can afford to.
SMALL HOLIDAYS/BIG HOLIDAYS
-Smaller holidays might include dates like Valentine's Day, Mother's Day, Father's Day, etc. For these occasions, I recommend the personal note and a favorite baked good. In 2005, we might have spent anywhere from $50-$100 on average on our parents and spouses/partners for the parent-days and anywhere from $100-$250 on Valentine's Day for our loved one. If you insist on spending money for these occasions, keep it at 50% of whatever you spent in 2005 as a general rule but the lesser holidays certainly no longer warrant monetary acknowledgement in 2011.
-Bigger holidays like Christmas, Chanukah, Kwanzaa, Easter, etc. are only relegated to close family--parents, siblings, children, and spouses/partners. It's hard to find significant gifts for less than $50 a person in 2011. Nevertheless, with money equalling 25% less than it did even two years ago, we need to think with our heads, not our hearts. In 2005, the average family spent anywhere from $1,500-$3,000 on a major holiday--whether that meant taking the family on vacation or buying expensive electronics, clothing, jewelry, etc. It's unreasonable in 2011 to spend even half of the lower end of the average Christmas in 2005. For 2011, $50 on your spouse, $50 on each child and $50 on each of your parents and say, one or two siblings can cost you $300-$400. Yikes. That's a car payment. Or your monthly grocery bill. Try cutting that in half, using things like baked goods to supplement or create a picture CD or collection of videos. These are warm gifts from the heart that go much further than a new iPod....
-Graduating from kindergarten is very different from a high school graduation--which in turn is very different than graduation from college. One year, it seemed every one of our acquaintenances had a child graduating from high school. Not close friends whose children I've known for most of their lives either--people who I hadn't seen in at least a decade. Half of the children wouldn't recognize me if they saw me on the street. And yet, there was this inordinantly large pile of invites on my kitchen table. In such a circumstance, no gift is required. For close friends and family, appropriate social gifting for high school and college graduations includes either writing a moving personal note and a small gift card of $10-$25 to a place like Barnes & Noble or simply giving a card along with a journal or book like Paulo Coelho's The Alchemist or Thoreau's Walden. Student loans are being defaulted on constantly. The average student graduating with a four-year degree has anywhere from $40,000-$100,000 worth of student loans. You may want to donate your cash to help the graduated student with their debt. But you can't. You did not choose their school or the amount of loans taken out. Your only choice is how to most appropriately acknowledge their accomplishment without over-extending yourself.
-Anniversary parties are something you might have to deal with once every 5-10 years, depending on your social connections. And though it's wonderful to celebrate the 50% of marriages that don't end in divorce, it's simply not appropriate to give a gift. If you are very close to the couple or it's a significant wedding anniversary, like a 50th, a $50 donation to the charity the blissful couple supports is most appropriate, followed by an anniversary card or thoughtful personal note (on good quality stock). Most couples married for more than 25 years don't need your money or your gifts; they have houses brimming full of stuff. More stuff isn't helpful. If the invitation doesn't specify "no gifts please" (though it should...), the best way to handle it is either by sending a nice card or making a small $10-$15 donation in the couple's honor. Many times, anniversary party gifts include things like Lladro statues or crystal bowls...but do you really feel that couple will benefit from your spending $100+ on a bowl or porcelain statue? If you really feel compelled to spend more dollars than you should, offer to be the photographer at the event or help make the centerpieces. Otherwise, to give an established couple money is in as much poor taste as them asking for it.
-Tipping in 2005 meant $50 to your mailman; $50 to your garbage men; and doubling the cost of your typical hair or nail costs in a given month for major holidays; in 2011, instead of giving your stylist double the cost of your hair cut, try giving her a 25% tip with a nice personal note. Give personal notes and baked goods to your mailperson and garbage people, too. You have to recognize the efforts of those hard-working individuals, especially at the holidays. In general, you would not tip service people like your garbage person or mail person other than the December holidays. But regardless of specific holidays, if you go into a hair salon to have your hair done, you must tip at least 20%; 10% if it's a partner or owner (though some believe there's no need to tip the owner of a service establishment, if that person provides you with a personal service, it's in appropriate not to acknowledge it). Same for your nail technician or massage therapist. No matter what time of year, when you spend money on personal services--you must expect to spend money on appropriate tipping. If 20% is too rich for your blood, than you should avoid getting the service or try limiting the service to once or twice a year. At the holidays, if you frequent a particular restaurant, double your normal tip to a wait-person who treats you well all year-long. Any other time of year, give at least 20% of your total bill. With situations like valet parking, coat room checkers, doormen, and cabs--it may not always be possible to totally avoid these services, especially if you live in a city like New York. Keep your coat-checker tip to no more than $1/coat and try to tip your cabbie no more than $5 for $25-$35 cab rides but no less than $3 if the total is less than $25. Valet parking or hotel valets should be no more than $5/day. Tipping your cleaning person at holiday time should be about 20% of your monthly bill; on a weekly basis, a tip is expected and can range from $3-$5. Alternatives to holiday tipping for any of these individuals can be a personal holiday card with a box of baked goods or home-made candy. Tipping hasn't changed much since 2005--the service people who help you live your daily life are not the individuals where you can cut back. If you can't afford to appropriately tip a service individual, the best course of action is to no longer request those services.
There is a caveat with this segment: Even though you may have relics from a former life like designer clothes or handbags, or a nicer car than you could afford in 2011 because you bought it in 2005--regardless of the decrease in the US dollar's worth or your lack of employment or change in finances, when people see you walking around with a Gucci bag or Jimmy Choo shoes, they will naturally assume you have more available monies than you do. The fact that you bought those items six years ago won't make a mental dent...you have them. And that's enough. So while you move toward a more fiscally-responsible social attitude, keep in mind that what your social connections perceive about your net worth matters just as much. If you meet girlfriends for lunch dressed in haute couture and bragging about your first-class trip to Paris, when you tell them you're cutting back on gifting 25%-50%, don't expect applause.
Though unfair, social expectations are not always based on reality. You earned that Gucci bag; you worked hard for that vacation--and you deserve to enjoy those things, even though you may be unemployed today. But people generally won't recognize you as being vulnerable--financially or socially. You'll be perceived as having a lack of generosity and labeled as "cheap." That alone can cause social disconnection. You may find your invitations become more and more limited.
The best way to deal with this caveat is to go through your closet; maybe selling some of your more expensive material items is a good idea in the 21st century, where cash--not Gucci--is king. Material status symbols still maintain a foothold in terms of social acceptance in 2011, but how long do you think that will last? When the US dollar's worth has dropped 25% in the last five years, you can be assured that in the next two, more and more people will be trying to unload their out-moded material goods.
Be ahead of the curve! You may end up ahead financially as well....