Just five more months until Christmas...and on December 26th many will wake up with a financial hangover that lasts months into the new year. It has happened to us - odds are that it’s happened to you as well. After all, we live in a crazy consumer culture that urges us to spend, spend, spend - especially for this holiday. While I’ve always loved to buy nice gifts for family and friends, we all know how dangerous this can be for our bank accounts. So, how can we avoid this financial hangover... or at the very least limit it?
Step one: Open a savings account at your bank or credit union and designate this account as a Christmas Savings Account. Set up an auto draft, so that every time you get paid, a predetermined amount flows directly into that account. This is hands down the best thing you can do to financially prepare yourself for Christmas! A few years ago we started doing this and it made a world of difference come Christmas shopping time. Less stress. More fun shopping. No worrying about paying a credit card bill.
The reality for many people is that they will pay on Christmas credit card bills until April (or later) of the next year. If we all step back and think about this, there is no way that it’s a good approach to Christmas spending. Time for a new approach! It’s almost August. While it would’ve been better to start in January, start your Christmas savings account now! You have five months to save! You’ll thank yourself later!
Step two: Have a Christmas budget and stick to it. I have struggled with this in the past - sometimes I still do. For the people that we love, it always seems like no gift is good enough to adequately convey our love. But, there are plenty of other things we all do year round that let those special people know that we care. While it is a great feeling to be able to give that perfect gift, we don’t need to be reckless in our spending. Have a plan for how much you are going to spend per person and STICK TO IT! Also, some families are so large, it may be a good idea to employ the use of name drawing or implementing another system so that you don’t feel the need to buy gifts for every single member of your extended family.
Step three: Keep in mind the other expenses aside from gift giving. This has caught me off guard a time or two. We planned for gift purchasing but not everything else. If holiday traveling is involved, budget for that. If you know an office party will be a part of your holiday celebration, budget for that. Extra grocery expenses, decorations, the tree, etc. Be prepared!
Step four: Avoid procrastination. Desperate last minute shopping = spending more on gifts than you intended to. And for me, it always results in at least a few purchases that are a far cry from what I had hoped to buy for that family member or friend. Take advantage of online shopping when possible!
Step five: Evaluate your priorities. Some gifts that we give will be used or played with once or twice and then tossed aside. I’ve always liked the idea of cutting down on consumerism and focusing more on family time and others. Don’t misunderstand me - I am definitely pro gift giving. However, most of us spend way too much money on Christmas! Would it be the end of the world if your kids only got 5 or 6 gifts instead of 15 or 16? Have a conversation ahead of time about your Christmas plans as a family. Tell them you’d rather make Christmas memories than overspend on things that won’t be played with come February.
Something to think about: if your five year old gets $500 worth of toys on Christmas morning, what expectation are you setting for that same child when he is fifteen year old? Start simple. Determine early on that Christmas will be about more than just a pile of gifts under the tree.
And we all should focus on the needs of others whenever possible - especially during the holidays. I know many families and individuals that already do some of the following things, but we could all use some encouragement to do more. Buy for a needy family or a child. Spend a day of Christmas break helping out at a soup kitchen or a food bank. Donate coats and mittens. Help an elderly neighbor with groceries. Pay someone's electric bill. The spirit of generosity is one of my favorite things about Christmas!
Final note: Christmas always falls on December 25th. It’s never an emergency or a surprise! Let’s plan ahead so that we can all look forward to celebrating Christmas with our loved ones without the guilt and overindulgence that generally ensues.
Feel free to comment or ask a question below!