Starting a Savings Plan for Holiday Spending
Why You Need a Holiday Savings Plan
Showing our loved ones just how much we care by showering them in gifts we (hopefully) know they’ll love is one of the many joys of the holiday season.
It feels good to give and create memories that will last a lifetime—but going into debt to make those moments happen isn’t so good.
Holiday season in America can get expensive, and it’s important that you stay fully in control of your spending to avoid falling into debt. According to MagnifyMoney’s debt survey, Americans accumulated more than $1,000 in holiday debt in 2019. Even worse, 78% of the participants of that survey said that they faced overwhelming credit card debt going into the new year—and 15% reported they could only pay the minimum fees on their balances.
While holiday shopping feels essential, it should never impede your financial freedom. If the holiday season is an important time of the year for you and your family, get started early by making preparations to cover your expenses without breaking the bank.
Make a Savings Plan for Your Income
It’s easy to go overboard spending when you find a good sale or the perfect gift for that special someone. A quick fix is to know where you stand financially, and create a savings plan with your other financial obligations in mind.
Your holiday savings plan should first address your monthly or annual income, including all of your fixed and variable expenses, such as your mortgage or groceries, respectively.
Once you have a clear picture of how much you earn and what must be set aside for bills, you can adjust your remaining balance for holiday spending. A rule of thumb is to spend no more than 1%-1.5% of your gross annual income on holiday spending.
Create a Holiday Savings Account
While you can use your already existing savings or emergency account, it’s probably best to create a separate account for your holiday funds to evade temptation to overspend.
Open a savings account with your bank or trusted financial intuition and make contributions according to your saving plan. Even if you can only put back $25 a week, if you start well before the holiday season, like the first week of January, you can save up to $1,300 by December.
The best way to contribute to your savings account is with automatic payments from your checking account. You can choose from every week, every month or every paycheck to set aside a portion of your funds to your holiday savings account.
Make a Shopping List and Check It Twice
Holiday spending can include more than just buying gifts. It may involve gift wrapping, packaging, shipping, cards, decorations, food, outfits and even travelling.
As you work on meeting your holiday financial goals, think about how the money will be spent. Your shopping list should include people you plan to purchase presents for, as well as the fixed amount per person (it’s okay to overestimate a bit to cover any surprise expenses). It should also account for any holiday plans such as hosting small get-togethers, or purchasing plane tickets and/or rental cars for family trips.
Since you’re getting started early, check your shopping list at least three times throughout the remainder year to update it with any information (like finding coupons) that will help you save and spend wisely.
You can even purchase some items before the holidays to score a better price, such as on Black Friday and make the holiday season a breeze for you and your wallet.
About Fyvie Financial
Creating financial health and wealth starts with sound financial advice. Fyvie Financial is a holistic financial institution that helps individuals and business owners achieve their money goals with unbiased and expert counseling. Founder and fiduciary, Kath Derisson, and her team of are dedicated to bringing their clients’ financial dreams into reality.