I know, I know, Christmas is months away. Exactly half a year away, in fact. So, why are we talking about it right now?
Well, it’s because way too many Americans go into massive amounts of debt for the holidays — precisely because they don’t start thinking about them now.
Not convinced that you need to start thinking about St. Nick when you haven’t even gone on your summer vacation? Check out these statistics from the National Retail Federation:
- In 2016, holiday retail sales boomed to $658.3 billion during November and December.
- American’s planned to dole out about $935 on average last holiday season.
- Many Americans planned to spend some holiday cash — around $140 — on themselves.
That’s a lot of spending to plan for! And, unfortunately, all too many Americans fail to plan at all.
In 2015, Americans who took on debt at the holidays added $986 on average to their balances. About half of those debtors put their holiday spending on a credit card. Many used uber-expensive store cards or, even worse, payday or title loans.
Sure, $1,000 may seem like a reasonable amount of debt to deal with, especially if you don’t carry a lot of debt otherwise. But with interest rates increasing, that balance could cost you a ton of money until you get it paid off.
Besides, why add any debt if you don’t have to?
Luckily, you don’t have to go into credit card debt over the holidays this year. At least, not if you implement a few of these easy, sneaky ways to start your Christmas saving plans right now.
Implement automatic transfers
Automating your savings works spectacularly when setting aside money for retirement or meeting other savings goals. When money automatically comes out of your account as soon as your paycheck hits, you barely notice that it’s gone.
There’s no time to spend it frivolously, you don’t account for it in your play money, and you can’t talk yourself into using it toward some other expense. It’s out of sight, out of mind.
There are two keys to making an automatic transfer like this work.
- Set a savings goal. Look ahead now to the holidays, and decide how much you want to have saved by then. Divide that amount out monthly (by 6, if starting now), and transfer that amount to your savings account each month.
- Earmark the money. Make sure your holiday savings don’t get mixed in with general purpose savings.
The easiest option here is to open a free savings account where you can hold the cash until it’s time to shop. You could also earmark it in your budget if you’re a strict budgeter, or use a bank account that allows you to separate money for specific purposes within the same account if you’re not. (These are often referred to as sub-accounts. Many banks, such as USAA and Capital One 360, allow you to add a number of these for free.)
Join a Christmas Club
Another option is to join a Christmas Club. Some workplaces still offer these options, so see if it’s available to you.
Basically, they set aside a portion of each of your paychecks. That money either goes into an account you can access, or comes to you in the form of an extra check come November or December. It’s a sort of forced savings that you may need to sign up for during your annual enrollment period.
If your employer doesn’t offer a Christmas Club option, look into local credit unions that do. These accounts can operate similarly to an automated savings account. It’s simply a dedicated (and ideally, free) savings account, which is funded by regular automatic transfers.
By the end of the year, you could have a tidy sum saved up for holiday shopping.
Don’t claim those reimbursements
Do you have a dependent-care FSA or an HSA, through your employer or healthcare plan? Unless your account gives you a dedicated debit card to use for qualified expenses, you likely have to apply for reimbursements.
Usually, the rule is that you have to apply for those reimbursements by the end of the year. You don’t necessarily need to submit receipts before then, though.
For instance, I am maxing out my dependent-care FSA benefits this year (because two kids in full-time care is no joke, people!). The $5,000 limit over the year amounts to $416 and some change each month. While I can apply for reimbursement once a month when I get paid, I don’t have to do so.
Instead, I could hold back on just two months’ worth of reimbursement. Then, I can claim them in mid-November, and the reimbursement would more than cover my holiday shopping needs.
If you have a similar reimbursement account, you may be able to do the same thing.
Start stockpiling gifts
This option doesn’t really save money for the holidays. It has the same effect, though, in that you’ll spend less during holiday shopping season. Plus, if you start shopping for gifts well ahead of time, you may find much cheaper gifts and be able to capitalize on sales or coupons.
Learn More: The 6 Best Credit Cards for Holiday Shopping
This is especially true if you’re willing to buy some gifts as high-quality secondhand items. Thrift shopping, garage sale hunting, and trawling eBay are all great ways to find interesting, unique gifts for less. The problem is that you need more time when shopping this way, so you have to start much earlier.
This is also the case if you like to hand-make holiday gifts. Starting now gives you more time to craft high-quality gifts that your friends and family will love. Since you have plenty of time, you can wait until any necessary materials go on sale at your local craft store, to net even more savings.
Combine this option with an automated savings option, and you’ll have money available to spend on holiday gifts when you stumble upon them or have time to create. The only question that remains is where to store all those gifts in the meantime!
Save up your rewards
Finally, don’t forget about the power of a good rewards credit card. Used responsibly, a good cashback credit card can get you some great rewards saved up, just in time for the holidays.
Check out our list of the best rewards cards if you’re interested in a new option. Then, rack up the cash back on everyday spending and pay down your balance each month. Those rewards will be ready to spend come the holidays!
Are you already saving for Christmas? How are you making it happen? Let us know in the comments!