How To Navigate Holiday Tipping

In Tell Me More’s weekly personal finance segment, "Money Coach", host Michel Martin looks at the holiday tradition of tipping the people who keep our world running smoothly, from the mailman to the baby-sitter. In a tough economy, how do you decide who to give a cash gift to? And how much is acceptable? Personal financial expert Alvin Hall offers advice.

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MICHEL MARTIN, host:

So, the new MJ album - that might be one gift-giving option. but you probably can't give that to everybody on your list. And what about those people who consistently keep your world running smoothly? Your babysitter, mail carrier, the trash collector - what about them? Now, cash always fits, but how much? Especially in these tough times, when your own wallet might be kind of light? So who better to ask than the man we turn to most for guidance on matters of personal finance? He's our money coach, Alvin Hall. Welcome back. Thanks for joining us.

ALVIN HALL: I'm very glad to be here. This is an area that I struggle with myself every year.

MARTIN: Now, why is that? You've been sort of doing the money thing for so long. I think it's interesting for people to hear you say that this is something you still struggle with. What do you struggle with?

HALL: I struggle with the tips in particular, because I live in doorman building in New York City. We have 12 people on staff. I have a house cleaner. I have the guy who cuts my hair. I have the guy who alters my clothing every year. So it's the tip issue that always, always burdens my mind.

MARTIN: Well, how do you work that out then? Why don't we just start there, since that's burdening your mind?

HALL: I start out with my housekeeper, who has been with me a very long time. I give her the equivalent of two weeks pay as her tip every year. And it's such a personal service and she cares about my place so much. The doormen in the building actually vary.

We have a communal pot that we have to put all the money into in the building. I would prefer to give it individually, but I think for the sake of having everybody feel good, I put money into the pot.

But I tell everybody, you can reduce those tips and that's what I'm struggling with this year because business hasn't been as good as it has been in the past. How much can I reduce that by and still make them feel cared about? But let them know that it's been a tough time so I can't do as much as I would normally do in the past.

MARTIN: Do you in fact say something?

HALL: Yes, I'm very explicit about it with, for example, the mailman and the UPS man. I'm always talking to them anyway. So I'll say to them, you know, it's been a tough year, as you know, and so I can't give you as much this year, but here's my card and thank you for the services that you provide. And they're very understanding. And I divide the remaining people into basically two groups - the $20 people and the $10 people. And then I decide, based on how much I can afford, will I give them $20 or will I give them $10?

MARTIN: Now, people say things like, well, for a nanny, a babysitter, a housekeeper, et cetera, at least a weeks' pay is considered an appropriate gift or a Christmas bonus, if you will. There are some people who'd say, well, that's ridiculous. I mean, I'm paying, you know, health insurance, I'm paying taxes, you know, I don't get a weeks' pay at my job.

(Soundbite of laughter)

HALL: I think that for people who are part of your personal life, who essentially are your family and your support system, who know you very well, those are the people you want to make sure that you show that you truly appreciate them. But I think the other people, you just decide they're in the $20 or the $10 category, and you just give them that with a nicely written card and say, I appreciate all the work you've done for me for 2010. You take the responsibility and write a personal note. You just don't sign the card, you know: Thanks, Michel. Or: Thanks, Alvin. You actually take the time to write a note shows that you care. Handwritten notes are so rare these days.

MARTIN: Once again, if you're just joining us, this is TELL ME MORE from NPR News. We're talking about holiday gift giving with our regular contributor on personal finance and the economy, Alvin Hall. Now, speaking of gifts, here's another gift that has become very popular over the years: gift cards.

HALL: I hate them.

MARTIN: You do? How come? Now, for a lot of people, say, hey, it always fits. They could get what they want. Why do you hate them?

HALL: I dislike them because when somebody gives a person a gift card, they should be aware of that person's shopping habits. If I got a gift card to a store that I've never been into or am unlikely to visit online, it's a complete and utter waste for me. Also, I think that gift cards are often just the last resort when people are looking for gifts. If they can't think of anything for you, they get you a gift card. I do not like them.

MARTIN: One thing that was interesting to me is - and I didn't know this until, frankly, you told me, that gift cards apparently commonly lost value if you didn't use them over time. Is that still the case?

HALL: No, and I can talk about this from personal experience, because I used to get gift cards and then go to the store. And they said, oh, Mr. Hall, it's lost $25 of its value. Since the passing of the Credit Card Reform Act in 2009, and I think it went into effect in August, gift cards must remain valid for at least five years. And they can't charge any fees on those gift cards if you use them for the past 12 months up to 24 months.

MARTIN: And of course there's always the danger a store might go out of business, in which case, you're really in tough shape.

HALL: Oh yes. I've had that happen too with a gift card for a company that went bankrupt and it was just worthless. So, when you get gift cards, I tell everybody, go out and use them immediately. Don't hold onto them. Even if you have to spend an extra one or two dollars to wipe out that balance, because you never can tell what happened, over the next two or three months, with that company.

MARTIN: Now, do you have advice for people about how not to fall into that situation? What do you do? Just carry it around in your wallet or what do you do? Now, I know you have some handy trick. Do you keep a spreadsheet of what gift cards you have?

(Soundbite of laughter)

HALL: You know me. You know me well. I keep all the gift cards in my bathroom lined up. That's what I do. So I wouldn't forget them, because every time I put them in the drawer, I would lose them. So you can either put them on a spreadsheet, carry them around in your wallet. I just simply lay them out so I can see them every single day and then I'd try to use them or I'd give them to friends - are you going to that store? Here.

MARTIN: You put them in the bathroom?

HALL: Yes, I do.

(Soundbite of laughter)

MARTIN: Yeah, OK.

What about credit cards? I know you - and everybody, I think, warns people against getting that big bill in January.

HALL: Yes.

MARTIN: And it used to be a joke. Now, since the recession has taken hold, I think a lot of people have stopped doing that. But a lot of credit card companies at this time of year, and retailers, are pushing out these promotions, like, every day, you know.

HALL: Exactly.

MARTIN: If you order by such and such a time, X amount off. You know, free

HALL: Oh yeah, cash back.

MARTIN: Free monogramming, cash back.

HALL: Oh, they're doing everything.

MARTIN: But you can save a pretty penny, though, can't you? If you take advantage of some of these deals? Or, what is your advice about this - how to be smart about this?

HALL: Read the fine print if you're going to use credit cards. Because some of them have cash back up to a certain maximum charge amount. So you end up not getting back as much as you think. When you use credit cards, the old adages still apply. Don't charge more than you can afford to pay off. Right now they'll offer you an attractive deal. But those credit card interest rates can still tick up if you miss a payment for six months or something goes wrong.

And, also, choose a benefit that works for you. If cash back is an important benefit for you, get a card with a cash back. If it's miles that benefit you, get one with miles. Therefore, you're, in effect, making your credit card work twice for you. But you must be able to pay it off at the end of the billing period. Don't get carried away so that you wake up in the new year with a financial hangover.

MARTIN: And, finally, Alvin, I wanted to ask you this because the fact is that many people listening to our conversation are going to be struggling. This is a time of year, I think, when many people can feel left out if they're not part of the whole shopping experience. And they're seeing these commercials. They're still running commercials with, you know, people giving people cars with big bows on them.

HALL: Yes.

MARTIN: Do you have some word of wisdom for people who really have to stay on a tight budget right now, and, you know, are just not feeling very good about it?

HALL: Yes, I do. I'm having this conversation with several friends of mine right now. And my advice to them was, if it's only a personal note or a personal letter thanking the person for all the support they provided to you over the years or thanking them for the service, make it a little personal note and just drop that in the mail to them.

Also, I think that people who have a little more skill at baking and things like that, can make cookies for people and wrap them in little packages and give to people, sometimes it's not the amount of money you spend, it's just the heartfelt nature of the gesture. And focus on that. If you don't have the money, focus on the emotion and giving them something that just says, I appreciate you.

MARTIN: Alvin Hall joins us regularly on matters of personal finance and the economy. He was with us today from our bureau in New York. Alvin, thank you so much for joining us and happy holidays to you.

HALL: Happy holidays to you.

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