I am always surprised by people that spend a bonus or a gift on something “fun” when applying that money to their debt would ease their burdens for the long term.
I look at it as buying piece of mind.
There is really a way to compromise when it comes to gift money. Take a set percent (10% or even maybe as much as 20%) and do something “fun” with it. Something memorable like a nice dinner out or if it is a small enough portion a couple of $5 DVDs from Wal-mart. Then use the rest to pay off debt.
But you need to have a solid, rigid, agreed upon rule on what that percent is.