When it comes to the holidays, our wallets can get drained and it is important we have a savings plan and a spending plan. Everyone pays for the holiday season in different ways. Some put everything on their credit card(s) and end up paying them throughout the following year, others may set up a Christmas savings account at their bank or credit union, and some may use bonus checks or work overtime to have money for the holidays. Whatever your case may be, you should have some type of plan that puts less stress on your financial life.
You first need to know how many people you are buying a gift. If you don’t know an exact number, over estimate a little. What I do is write down names of the people I am buying for and throughout the months I can add or subtract. This way I am not forgetting anyone and I go over the list with my husband for him to double check. You also want to figure in holiday parties and any little extras that may arise. Once you get a good view of the number of people you are buying for and what events you may attend, you can start with an amount that you don’t want to exceed.
You don’t have to spend the same on each individual. Some presents will cost more than others, but at least you can work around whatever budget you can afford for the holidays this year.
Paying with a Credit Card
If you choose to pay for the holidays with a credit card, you don’t know what the future may bring and you could end up facing job loss, sickness, or another reason that could cause income to decrease. This is why we suggest you save for the holiday season. Therefore, when the season is over, you are not paying additional money on interest to the credit card company. If you started putting money in a savings account you would be accruing interest.
Build your holiday budget on what YOU can afford, not what your available credit says you can afford.
Christmas Club Accounts
Some banks and credit unions offer Christmas Club Accounts. These accounts accrue interest just like a traditional savings account, but you are penalized if you withdraw the money before the release date set by the bank or credit union. They usually release your money around mid October and give you a check or they deposit the money in your checking account. If your employer has direct deposit, it would be a good idea to have your employer take out a certain amount from your paycheck each month and deposit it into your Christmas Club Account. After a few paychecks you get used to living off of the new take home pay and you don’t have to go to the bank to deposit the money. Call around for rules and regulations of the Christmas Club Accounts in your area.
Bonus or Commission Check
If you are relying on a bonus or commission check to pay for the holidays, there is no guarantee you will actually receive that money or the full amount expected. If you don’t have any money saved, you may result to a credit card, payday lender, or a title loan. Those options can put you in financial distress, especially if you can’t pay them as promised.
The safest way to have money for the holidays is to save throughout the year. You don’t have to start January 1, but the sooner you save, the less pressing it is on the family budget. This is also a good time to teach your children saving and money management skills.
Holidays are stressful enough. By planning ahead, we don’t have to worry about not having money or paying it back the following year.
Written by Beth Mincks, Consumer Credit Counseling Services of the Ozarks
For savings tips follow me on www.twitter.com/@moneymincks