Make your holiday spending less scary and start saving now

With the holidays still six months away, you’re probably not ready to begin thinking about holiday shopping. But if you stop and do just that, you’ll realize the advantages of planning your budget ahead of time. The holiday season can be an extremely stressful time for reasons we’re all familiar with. Getting presents for all your loved ones, charitable giving, traveling, special family outings and all those last-minute trips to the holiday aisle can add up quickly. But when you spread out your “holiday splurge” over the course of the year, then December comes and goes, and your wallet is never the wiser.

Saving for the holidays months in advance will require some evaluation of your spending habits. This will allow you to have the opportunity to adjust and begin saving money for next year before you have even taken this year’s decorations down. On top of that, imagine the feeling when you hit the stores at midnight on Black Friday and you realize you’ve virtually paid for everything already! Having an account pre-funded and designated for holiday spending is also a great way to keep your spending in control and on budget. If you estimate the average holiday budget to be $1,000, you would have to save about $91 each month, from January to November, to cover your costs by Thanksgiving. (If you’re starting mid-year you’ll need to save about $182 per month). Putting $91 into a savings account once a month is much easier than attempting to pay off the credit card bill that you would have racked up, or worse, incurring fees and penalties if you have to dip into a more restricted account.

So now that you’ve realized how smart and simple holiday savings can be, how do you go about doing it? Consider the things you spent the most on last year during the holiday season, and the things you would like to spend a little more or less on this year. Some common categories are gifts, travel, charity, holiday memories, and any miscellaneous expenses that come up. Dig into your receipts or account activity from last season and create an estimate of how much you spent on all your holiday related expenses. Go a little further and give yourself a budget for each category we mentioned before. This allows you to see where you may want to cut back or do more. Take your “dream holiday budget” and make that your savings goal. Divide that number by 11 and you’ll have a good estimate of what you need to save each month to reach your goal by November. Remember, if you’re beginning to save in July, you’ll need to increase your savings amount each month to get there by November.

The idea and intention of saving money for the holidays is great but you need to have a place to put your savings. The simplest option is to open a savings account at your current bank and label the account something to the tune of “Holiday Spending”. For those of us shopaholics who may need some help restraining from making premature, non-holiday related purchases there may be another option. Some banks still offer an account known as a “Christmas Club Account”. This is a temporary, slightly restricted account that’s designed to help people accomplish the exact task we are suggesting. You can set up automatic deposits to the account, but you’re often penalized if you withdrawal the funds before a certain date, say November 1st. It can be difficult to find an institution that still offers a Christmas Club Account, but your local credit union may have more specialized savings vehicles available.

For some, adding an additional monthly savings contribution is not an option, but there’s no need to let your holiday season shine dim. Think about ways to cut costs without losing out on the personality and joy of Christmas. If you have a large, extended family, talk to your relatives and see if they’d be okay with only giving gifts to the kids. You may be pleasantly surprised at the reaction (and relief) they have.  In addition, older relatives who get more joy from giving than receiving may not be able to give to their favorite charities due to their own financial burdens. So, this year, make a donation on their behalf.

One-final holiday savings tip! Check out the holiday clearance section of your favorite store on the days following December 25th. You can always stock up on string lights, wrapping paper, and holiday cards for next year at highly discounted prices!

Nathan Boxx, Bradley Newman, Jason Seltzer

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