If you’ve made your way through Financially Fit Bootcamp and have your Perfect Account Structure setup, congratulations! You’re all set with your holiday spending, and this article isn’t for you. But if you’re not a member of Financially Fit Bootcamp…
…you’re probably saying, “It’s only October!” That means there’s a good chance you haven’t thought about what you’ll spend on gifts for loved ones yet. And even if you have thought about it, you’ve been pushing aside that little whispered warning in the back of your head thinking you’ll deal with it later. Because you know the holiday season comes around every year, and you know you should be sending money to a Holiday Spending Account throughout the year. But when you’re stuck living paycheck to paycheck, you’re likely also entrenched in a vicious cycle of charging, going into debt and falling into guilty remorse. The result? A whole lot of Money Stress at exactly the time of year when you should be enjoying family and friends.
In the United States alone, the average individual took on $1,003 worth of holiday debt in 2016, up from $986 in 2015, according to one study.
The good news is that you have the power to break the cycle this year, no matter what your income level. Plan NOW—in the days before Halloween rather than in the final days of November. You’ll be more empowered to make conscious gift-buying decisions that won’t derail your Financial Freedom. Put the right plan in place, and complete Financially Fit Bootcamp as soon as possible. You won’t have to think about affording holiday gifts ever again.
What To Do In October
The first step to making it through the holidays without incurring more debt is to assess your current financial situation. Without going into your Pay Yourself First account, Emergency Buffer or endangering any of your required, regular monthly payments, have you set aside money for a discretionary spending goal that can be delayed? This is your opportunity to choose Financial Freedom and your future rather than debt and more Money Stress.
Once you know how much you can free up by the end of November (e.g., $300), it’s time to figure out how much more you’ll need to gift everyone on your list.
Making Your List…
To do this, make a list of your ideal budget and expenditures for the holidays. What do you think you should spend for each family member? Write down each family member’s name and an approximate dollar figure, say $50. So if you plan to purchase presents for 10 individuals, for $50 each, that’s $500. Then, make a list of non-family members you would like to tip or gift—mail carriers, house cleaners, teachers and any other important individuals in your life—and the amount you want to spend on them (e.g., $20 each). If that list adds up to $200, your total planned expenditures is $700.
Subtract the first number ($300) from the second one ($700). You’ll see you need $400 more to reach your goal number.
…Checking It Twice
At this point you have a few options:
- Pick up extra freelance gigs or a holiday job during after-work hours to earn a little extra;
- Cut back on day-to-day discretionary expenses and redirect that money to your holiday spending fund (Yes, you can “pause” your Netflix account);
- Trim down your gift budget. By spending $40 instead of $50 on 10 individuals, you save $100. Or reduce your list by resolving to only give gifts to those who are closest to you this year.
- Better yet, if you have the time, make a few or all of your gifts this year. You might find that’s even more fun than shopping!
Planning For Future Holidays
So how do you make sure you don’t find yourself in this exact same position next year? The best way to avoid future Money Stress is to set up your Perfect Account Structure and Automate Your Finances. For this type of spending, you’ll open up a Holiday Account and set up an automatic transfer a few days after your paycheck arrives. While transferring just $50 a month doesn’t seem like a lot, if you do this every month, you’ll have $600 by year’s end. And that means you won’t have to hustle to make additional spending money at the last minute.
Instead, you can enjoy the holiday decorations, friends, family, and all the joyful holiday experiences that have nothing to do with money.
Community Question: What are you doing to make sure the holiday season doesn’t derail your Financial Freedom? Share with us in the comments below!
image credit: Bigstock/CHOReograPH
Marisa Torrieri is an award-winning journalist and freelance writer specializing in personal finance, business, healthcare and technology. She has a master’s degree in journalism from Northwestern University and resides in Fairfield, CT. Her work has appeared in dozens of media outlets, including LearnVest, Forbes, The Washington Post, Business Insider, TIME and Health.com.