Why You Need to Save Now for Christmas

Published

September 13, 2013

Jim Blankenship is the founder and principal of Blankenship Financial Planning, Ltd., a fee-only financial planning firm in New Berlin, Illinois. A financial services professional for over 25 years, Jim is a CFP® professional and has earned the Enrolled Agent (EA) designation. He wrote An IRA Owner's Manual and A Social Security Owner's Manual. He also regularly blogs at Getting Your Financial Ducks In A Row.

With Christmas shopping season just around the corner, a bit of pre-planning may make the post-Christmas season a bit merrier for you.

Americans planned to spend an average of $854 on presents for family and friends last year. However, for many families there is no planning ahead, no savings — and so the spending winds up adding to an already outrageous amount of consumer debt.

How to Make Your Christmas (and Post-Christmas) Merrier

As with all activities that have an impact on your bottom line, planning ahead can help you to navigate this season and avoid derailing yourself financially. If you set a distinct budget for your spending in advance, planning that you always spend $30 on a cheese-of-the-month-club for Uncle Sid, and that your kids, Jonny & Janie will want the latest YBox or PS9 or whatever those gaming consoles are these days, costing a few hundred apiece. Whatever your plan, you should research the costs of the specific items ahead of time and tally up your spending.

If it turns out that the money to be spent seems like an awful lot, you’re in a position now (a few months early) to make adjustments. Maybe you need to scale back a bit – but if you hadn’t planned ahead, you wouldn’t know this.

Just as it makes good sense to think about what you are intending to spend on presents for your family and friends in order to fit the costs into your budget, it also makes a great deal of sense to put the money aside now, ahead of time.

If you think about it, either way you’re going to need to come up with the money. If you wait until later, you’ll have to pay off the credit cards, including ridiculously-high interest rate charges. Or you can set aside the money now at no extra cost. Having a set spending limit will also help you to stay on your budget.

Too often we go out to find Christmas presents without having thought about it in advance, and we wind up spending much more than intended since we’re working on whims. With a plan in place ahead of time, you know what you want, and you know where to get the best deal on it, so you stay within your plan.

Join the Christmas Club

Many years ago when I was a youngster (and my daughter reminds me that the earth was still cooling at the time and Christmas meant more because the birth of Christ had only recently occurred) I had something called a Christmas Club Account at the local bank. I’d set aside a certain amount of money every week to deposit into the account, and then on Nov. 1, I’d get a check to be used for Christmas present purchases. At that time I remember putting aside as little as 50 cents a week, and getting a check for something like $25.

As I understand it, Christmas Club Accounts are still around, mostly in small banks and credit unions due to the high cost of maintaining the accounts, but the concept is very sound. Setting aside small increments of money throughout the year for a large one-time expense makes a lot of sense – you don’t miss the small amounts set aside each week, and it adds up over time. This is much better than being drained by interest charges on a credit card account after charging everything at Christmas-time.

Just imagine how you’ll feel on Christmas morning, knowing that you won’t be facing huge credit card bills come January – what a wonderful Christmas present to yourself and your family!

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