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Della is unhappy because she has been saving money all year to buy her husband Jim a nice Christmas present and has only been able to save one dollar and eighty-seven cents. This is what motivates her to sell her long, beautiful hair, an action from which the remainder of the story unfolds. O. Henry presents her problem in the first paragraph.
ONE DOLLAR AND eighty-seven cents. That was all. And sixty cents of it was in pennies. Pennies saved one and two at a time by bulldozing the grocer and the vegetable man and the butcher until one's cheeks burned with the silent imputation of parsimony that such close dealing implied. Three times Della counted it. One dollar and eighty-seven cents. And the next day would be Christmas.
The fact that the next day would be Christmas makes the problem urgent. Della has no more time to save more money. This is what editors call a "ticking clock." Someone has a problem and the problem must be solved. There are a lot of problems that do not necessarily have to be solved within a certain time frame, and there are a lot of problems that never do get solved. In O. Henry's best stories there is usually a ticking clock. For instance, in "The Cop and the Anthem" Soapy has to find shelter soon or he will freeze to death. And in "The Last Leaf," Johnsy will die when the last ivy leaf falls unless something is done.
The entire story is told from Della's point of view. She is so unhappy that she flops down on their old couch and cries for a long while. Then she has an inspiration. She goes to a tough woman who calls herself Madame Sofronie and sells her hair for twenty dollars. With this Della money is able to buy Jim a perfect present, a platinum watch fob. Della never mourns the sacrifice of her hair. What troubles her is the fear that her husband will be horrified when he sees her and will cease to love her. This shows that the story is about love and not about material possessions.
She had a habit for saying little silent prayers about the simplest everyday things, and now she whispered: “Please God, make him think I am still pretty.”
Jim is actually a minor character. We know him more from that Della thinks about him than we know from seeing and hearing him at the end. Della's unhappiness is dissipated when Jim assures her that he loves her for herself and not for her hair.
“Don't make any mistake, Dell,” he said, “about me. I don't think there's anything in the way of a haircut or a shave or a shampoo that could make me like my girl any less."
Paradoxically, his sacrifice of the watch proves his love for her and proves O. Henry's thesis that love is more important than material possessions.
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