It's reported that the typical American spends $1000 of his/her income on Holiday spending each year.
Wow....that's a lot of money!
Back in the days of Jean Shepherd's youth, that sure would have bought Ralphie a load of "official Red Ryder carbine-action 200 shot range Air Rifles with a compass in the stock and this thing that tells time", wouldn't it?
How many years have you gone into the Holiday Season telling yourself you'll only spend $X this year and after the credit card bills start rolling in the following months, you add it all up and you WAY overspent the amount you set for yourself?
I'm betting it's almost every year, if you are like most people.
But this year do something different.....make a Holiday Budget!
Make a budget and then decide, BEFORE YOU SET FOOT IN A STORE AND SPEND A PENNY, how much you will delegate toward each item in your budget and stick to that plan.
But how do you decide on how much money to put into your Budget?
Let's take that typical $1000 figure.
Put that amount against your yearly take-home pay figure and see what percentage of your income that $1K comes out to be. Use your net pay since that is what you actually get after taxes, investments and such to spend in your day-to-day life.
If your net pay is $40K, that's 2.5% of your yearly take-home income.
If your net pay is $30K, that's slightly more than 3.33% of your yearly take-home income.
If your net pay is $20K, that's 5% of your yearly take-home income!
So don't go by what the "average" American family spends. You need to figure out using your yearly income, what YOUR family can afford to spend at the Holidays!
I'd suggest you go through your monthly bills-the fixed and variable charges you must pay each month(mortgage or rent, utilites, car or student loans, food, gas, credit card min. payments, etc.). Whatever is left over after the bills are accounted for, for the year, is the place to start to see what you can afford to spend. Be sure and leave some "wiggle" room in an emergency fund for those unforeseen expenses that happen through the year.
Once you set your spending Budget, now you have to allocate where/how you will spend it all.
Sit down with your partner(if you have one)and get out that Prioritized Spending List you hopefully made up that we talked about last time. Now take whatever budget figure you have set and decide how much to spend on what item.
You will probably find that when you add all your item spending up that it exceeds the total budgeted amount you can afford to spend.
Now go back through your list and either cut your spending on individual items according to it's importance in your life or rethink whole items on your list and possibly cut those items from your list.
The other option if you can't cover all the items on your list is to think of a way to bring in additional money over the next 2 months. Get a side job, sell some things, donate plasma, etc.
Again, make this a joint decision if you have another adult in your household who is jointly responsible for the income and spending.
Now I'm aware that not everyone(ok, hardly ANYONE!lol)will be able to follow a budget and only spend whatever is allocated per item on the list. You are allowed to go over a bit or spend a bit more here and a bit less there. The budget and list is just to make you conscious of your spending habits this Holiday so that you don't wake up on Janurary 1 and find that you again spend WAAAY! too much money than you can afford for the Holidays.
Once you have a workable budget, you need to think about how you will keep track of your spending and how exactly you will spend your money.
I'd recommend an envelope or a pouch of some kind to keep ALL your receipts in.
Keep it in your car or your purse(if you carry one)and stash every receipt there until you get home. Once home, either keep a spreadsheet on your computer or get a notebook or folder with loose leaf paper in it to list and organize in whatever way that works for you. Put all your receipt information into your notebook/spreadsheet/etc. and tally up your spending weekly or more often(if you do alot of Holiday spending every day), so you can see what you have spent and how much you have left.
Making a budget won't help you one whit if you never record and look at where your money is actually going!
As for what forms of payment to make all your Holiday purchases with.....unless you are VERY self-controlled, do NOT put your purchases on a credit card. Though you may get great "points" toward gifts or services or airplane miles when you use your credit card, very few people have the self-control NOT to overspend when using a credit card. And if you already have a balance on a credit card(s) and you only make minimum payments, do NOT under ANY circumstance use your credit card to pay for anything this Holiday Season!
So that leaves debit cards that link directly to your bank account, checks or cash to make your Holiday purchases. Personally, I like to use cash.
These methods of payment are more likely to help you to spend less this year and you will not wake up in January with a credit card hangover and spend the next 9 months paying off the Holiday induced debt.
And looking ahead to 2011.....
It's never too early to begin thinking about how to approach the Holidays for the coming year either. If you have a hard time saving and scraping the cash together to fund everything you want to do at the Holidays, consider opening a separate account to save/keep money for just the Holidays for 2011. Christmas Club Accounts have made a comeback in recent years. These are accounts that usually begin in October and every week either a set amount is moved into this account from a source you designate(another bank account)or you have to physically go and deposit money into the account yourself. At the end of the Club term, you are sent a check for the amount you put into the account. Usually there is no interest gained on a Christmas Club Account. It is just a
forced savings vehicle, helpful for those who can't save money if left to their own devices. You could also open a passbook type bank account and earmark that money for the Holidays. However, the interest rates are pretty much nil right now and they won't nag you to make weekly deposits.
Get creative in coming up with ways to put money away for next Christmas. If you coupon, how about taking all your coupon savings and depositing that money into an account. For example, if you use coupons and save $15 a week at the grocery/drug stores, take $15 from your weekly budget and put it into a bank account or even an envelope in your sock drawer. Do that every week for 40 weeks and don't withdraw anything or raid that envelope, and next Christmas you'll have a nice little pot of $600 cash to put toward your Holiday expenses!
So do you plan on making a Holiday Spending Budget? I'll be sitting down with Hubs this weekend to set up our budget.
How do you pay for your Holidays? Do you have any tricks to get yourself to put money away for the Holidays?
Leave a comment and tell us about it!
Sluggy
