Christmas is over. Hopefully you were able to enjoy some time with loved ones. Now the other shoe drops, though. January heralds the arrival of the credit card bills.
There’s a reason stress levels are so high this time of year. The period between Thanksgiving and New Year’s Day is likely the period of highest spending during the whole year for most households. If you were able to sneak through December without dealing with many bills, January’s probably not going to be quite as kind to you. Depending on how much your spending increased during the Christmas season, those bills may put a major strain on your bank account.
Well I don’t have a way for you to make all those problems go away, but I might have something that can help take the sting out of it. For next Christmas, rather than running headlong into your bills using only your regular paycheck, it might help to save up for your Christmas expenses during the whole year. I bring this up now because you’ve got almost an entire year to prepare for the next Christmas. The priority, obviously, is to pay your bills from this Christmas, but if you’re done with that already, you may want to take a look at this strategy.
How much did you spend on this past Christmas? Add everything up. Include those gifts for friends and family that come to mind easily, but what about the less obvious things? Your list might include things like gifts for your kids’ teachers or members of the club you’re part of, white elephant gifts for parties at your work, end-of-year donations, etc. Don’t forget the extra electricity for decorations (indoor and outdoor), the higher electrical demands accompanying the hosting of guests, and additional heat during cold weather. Maybe you picked up some special booze as a Christmas treat. Did you have any extra out-to-eat occasions in late December? Did you have to travel somewhere (gas/tolls/tickets)? Add all of that to your list and tally it up.
After giving it a little thought, maybe that number is a little higher than you expected. Depending on your situation (mainly how many people you purchase gifts for and how extravagant your celebrations are), your total could be anywhere between $200 and $5000 or more. I’m not going to tell you what “right” is, but if you’re feeling pinched, maybe you can make an adjustment now to help prepare for the next round.
Take your total and divide it by the number of paychecks you get in a year. If you get paid every two weeks, you get 26 paychecks a year. If you get paid twice a month, that’s 24 paychecks. After dividing the total cost by the number of paychecks, whatever number you get, that’s the amount you’d need to save per paycheck to cover the same amount of expenses this coming Christmas. Wish you had a little more cash to cover this past December’s festivities? Boost that number a bit. If you did something out of the ordinary that you don’t plan on doing again, like a special trip, you can get away with saving less per paycheck to cover things next time.
Next, it’s a good idea to have a separate bank account for you to start stashing your “Christmas cash.” You could keep it all in your normal account and keep a running tally of how much of that money is set aside for December use, but unless you’re pretty diligent about keeping track of that sort of thing, it gets hard to distinguish how much of that money is just your normal account and how much of it has been set aside for specific use. That’s an easy way for the money to get sucked into other spending throughout the year. Setting up automated ways of funding this account every paycheck makes it easy for you to build your celebration fund without having to actively think about it during the year.
By way of example, if you’re paid every two weeks, $50 per paycheck is $1300 at the end of the year. If you go $60 per paycheck when you get paid twice a month, you’re looking at a total of $1440 by your last paycheck of the year. Even small additions can add up. At those two paycheck rates, saving $5 more each paycheck can mean a total of $120 or $130 more at the end of the year. By this point you probably already got your first paycheck of the new year. Even if you did, January’s still a great time to get started on setting up this kind of system with your bank, credit union, or section of the mattress where you stash your money.
Sacrificing that much per paycheck might be too much of a stretch. I totally understand that, but I’d also ask this…if that’s too much to set aside per paycheck, do you have a reliable plan for paying it off all at once if you don’t use a method like this? If for one reason or another this strategy isn’t going to work out for you, consider doing most of the year’s paychecks like this and taking a break when needed, or only saving half or two-thirds the amount per paycheck and coming up with the rest via whatever method you’ve been using. Either way will help cushion the blow if you’re not already doing something similar.