Making sure Christmas is paid for

Admittedly, I am not a financial expert, and I won’t typically be giving financial advice within this blog. However, now that Halloween has passed, we can officially say the holidays are upon us. In fact, I know many in my inner circles who have already begun their Christmas shopping. As such, it’s timely for me to share some intentional savings guidance I received from my parents several years ago.

When Tom and I were first married, I noticed us charging a ton of expenses and gifts to our credit cards in Nov. and Dec. and then struggling after Christmas to pay off those huge expenses. In talking to my parents about this, they suggested a simple solution that had worked well for them. And not only does it work well with Christmas savings, it can really be used for all kinds of savings purposes.

They suggested I set up a separate account called “Christmas fund” and that I have money automatically deducted directly from my paycheck into this account each pay period. Taking the money directly out of my pay meant we wouldn’t miss it, and the money would be tucked away every two weeks leaving us with a sufficient amount by November to use throughout November and December for our Christmas budget.

You can establish whatever budgeted amount you need and then work backwards. We decided to shoot for a little more than $750 in the bank dedicated to Christmas-related expenses – gifts for family and friends, travel to and from Michigan, office donations taken up to contribute towards a gift for the boss, etc. Assuming 52 weeks in a year, or 26 pay periods (where I work), and that we wanted the money to be available by the first of November (8 weeks, or 4 pay periods, before the end of the year), we’d need approximately $35 deducted from each of my paychecks and automatically direct deposited into our “Christmas fund.” That was certainly do-able and didn’t break the bank.

Then, we could either pull money directly out of the account and pay cash, or could charge items to the credit card but confidently know in advance that we had the money in savings to pay for them. We wouldn’t be left wondering where the money was going to come from in January and February, and we wouldn’t face large balances on credit cards we’d have a hard time paying off, either.

This same technique can be used for other budgeting purposes as well. I not only have a “Christmas fund” but also now have an “Emergency fund,” “Vacation fund,” “New Car fund,” and general savings accounts for both of my girls – separate from college savings we have established for them through various investments.

These accounts don’t grow exponentially overnight, but a little money tucked away intentionally and automatically each pay period will surprise you with accumulated savings when you finally take the time to go online and check your balances.

This technique served my parents well and has served us well, too. Is this something you are already doing? Do you have another system that works well for you? How are you intentional with your money and your budget?

Yours intentionally, Amanda