In just a few short months, you’ll see articles about holiday money stress. There are gifts, events, and parties to pay for — and it all adds up. While there are many events in life we can’t plan for (and that’s why we have a rainy day fund), there are those events that we can plan for but don’t. The holidays are a great example! They happen every single year.
The sooner we start saving, the easier it will be on our paychecks but even starting now will decrease the pain of the holidays tremendously.
August is also the only month of the year without a major holiday. This is a perfect time to get a head start. On August 1st, there are 133 days until the start of Chanukah and 146 days until Christmas. It was estimated in 2016 that the average millennial would spend $1,427 on holiday season purchases. Putting away less than $11 a day starting on August 1st would allow you to ring in the New Year without any holiday debt. Here are some simple strategies you can adopt now to enjoy the holidays without the additional financial stress.
Plan it out. While you won’t know exactly how much you will want to spend come November and December, you can make a realistic guess. How much did you spend last year? What gifts would you like to buy? Any parties you’re throwing? Don’t forget gifts to the professionals in your life like your hairdresser, doorman or mailman!
When do you need the cash? While you might not be throwing your holiday party until mid-December, you might want to make some purchases earlier in the month. Look through your holiday expense plan and estimate when you want to make each of the purchases.
How many paychecks? How many paydays do you have from now until you plan to make each of your holiday purchases? Having an idea of your overall earnings for the rest of the year will give you an idea of your eventual budget.
Calculate it out. If you plan to send $500 and you have 5 paychecks until you want to spend it, you will want to put aside $100 per paycheck. How much do you want to put aside per paycheck to hit your holiday spend plan?
Make the space. I highly recommend creating a bucket or separate account in your online savings accounts specifically for holiday spending (and any other of your larger, less frequent expenses). This is your holiday fund.
Make it automatic. Have whatever amount you calculated per paycheck transfer over automatically to your holiday fund each paycheck. In the above example, you’d set up $100 to transfer to your holiday fund each paycheck so that the cash is there and ready for you when it’s time to make your holiday purchases.
Be ready for temptation. With Black Friday, Cyber Monday, and overall holiday sales (seemingly happening earlier and earlier each year), it can be easy to be swept up in the madness. Know going into the holiday season what you want to purchase and what you can skip. If you have an impulsive streak, you can leave a little room in the budget for “blow money” (like, say, blowing your money on a pair of shoes you definitely don’t need).
Apply this to the rest of your money life. The holidays are a great example of a less frequent larger expense in our life where we can benefit from some planning but there are often many more examples of this throughout the year.
Apply these steps to other areas of your financial life to make sure you hit your saving and spending goals in the timeline you want. You can use these tips for your vacations, rainy day fund, kid’s tuition or camp costs and even haircuts. Happy savings!
Want more of these savvy money strategies? Join us for the 30 Day Money Cleanse – next cohort kicks off on October 16th!