Published on 12-08-2016
The following was written by one of our members, Mr. W.J. Borden. Thanks for sharing how your family budgets and saves for the holidays. Great suggestions!
My suggestion, in short, is to set a total budget amount that you can afford, then save, save, and save some more. When you start shopping, stick to the budgeted amount and pay cash. Most of us can scrape up $10, 25, or maybe even $100 for a gift for one person during the year, but for even the small family, the annual December gift-giving-peak can be a strain if not planned for. If you haven’t saved in advance, I strongly recommend setting a total budget you can afford out of current income/savings, but not out of your emergency fund. This is not an emergency! And then, as soon as the holidays are over, start saving for next year. But, how do you accomplish this? Let me tell you our story. Hopefully, it will be a model you can adopt as your own, regardless of the size of your family.
Over our 51 years of marriage, my wife and I have learned many financial lessons. Regarding holiday and other gift spending, we have always spent based on what we felt we could afford. We have also endeavored to spend the same amount on each person, though not necessarily the same amount on adults as children. The practice of being conservative and keeping things equal was passed down to us by our parents, who experienced the Great Depression. However, in the early years of our marriage, we did not save towards holiday spending. There always seemed to be too many other things clamoring for our income. Initially, we kept things under control by making gifts for our parents and siblings, often from kits. We occasionally do this today as well, though not for the same reason. I’m not sure that homemade gifts aren’t the most loved and appreciated. If we made the proverbial “ugly Christmas sweaters”, though, the reception may not be the same.
Although our income increased as our family grew (we have five children), it wasn’t proportional. Because we did not save for the December Holiday spending peak, we fell into “charging” most of it. At first, it wasn’t too bad because we were able to use our income tax refund to pay off the credit cards. However, at some point, we had a two- or three-year period during which it took all year to pay for the previous Christmas. We realized that was totally ridiculous and finally started saving, first through a Credit Union Christmas Club savings account. Later on, we created what our personal financial software calls a Goal Account. In some personal financial software programs, you can create special accounts in which you can automatically “hide” money from particular saving or checking account balance. As long as you don’t permit the balance of that account, as it shows in the software program, to go below $0.00, your goal is protected. Alternatively, you can always set up a “Holiday Fund” account yourself, using a special Coastal savings account. The key is to plan and save in whatever manner works for you on an automatic, set schedule.
When determining how much to save, we decided what we could afford as our total Holiday budget, divided it by the frequency of my pay periods, and automatically saved that much each period. Our goal is to save the expected total by September or October to ensure we have the cash available during shopping trips. The first year you do this, you may have to save more per pay period, depending on when you start. However, after the first year, you can save less per pay period because you fall into a twelve-month cycle.
Most special holiday savings accounts are locked so that you cannot withdraw money until the expected time-of-need. This type account is especially good for anyone who might have trouble keeping their fingers out of the “pot”. However, if you have the discipline to leave it alone, keeping the money in a regular savings account enables you to tap it during the year should you see a good deal or special gift during the year. When determining how much to save, we included family, special friends, special charitable gifts, and a small amount to cover new decorations and the unexpected gift or two. I am sure that we did not include all this at first, but that is what we currently include.
When setting and dividing your budget, remember that you are not obligated to buy or give to every Aunt, Uncle, and cousin, to the n’th generation, unless you can afford to do so. You also do not have to give to everybody who gives to you, as nice as it is to be able to do so. You must consider your priorities when setting your budget. In other words, it is our belief that we need to give to our immediate family first, then to others in need, and then to extended family and friends. Only you can determine what fits your family and your budget.
So, how do we ensure we keep on track as we purchase gifts? We diligently track our spending, the amount, and for whom. To do this, I created a spreadsheet. To some, this may sound nerdy or overboard, but you must track what you spend on each person to stay on budget. This applies whether you have a long or short gift list. Staying on budget per individual ensures you stay within your total budget. When we purchase a gift, we log it on the spreadsheet against that individual.
Getting started takes discipline and sacrifice. Once the flow is started and you are accustomed to it, the money is not missed. But, how do you start if you still owe for the previous year’s holiday? My suggestion is to commit your income tax refund, if you receive one, to pay off as much of your gift debt as possible. (If it covers more of your debt, use it for that as well. But that is the subject for another post.) Other options include committing any bonus you may receive, cash gifts from others, and even taking a short-term, part-time job. The point is to do whatever you need to do because, overall, it will make your financial life better.
How do you adjust your budget to keep it under control, especially as your family grows or your financial situation changes? You guessed it! You reevaluate what you can afford! This may include the hard task of decreasing the amount you spend on each person, but that is better than forcing yourself into debt. We currently budget for 5 children, their spouses, 14 grandchildren, 2 great-grandchildren, and a few friends. The total amount, though, is not excessive and is well within what we can afford. How have we adjusted our budget? In various ways. Sometimes we have been able to simply increase the total budget, and thus the amount saved throughout the year. Other times, we have altered what we give to each individual, especially the adults, rather than increase the budget. For example, when our children first married, we were able to give each new spouse the same amount we had been giving our child. However, as they gave us grandchildren, we had to do something to keep our budget from getting out-of-hand. First, we gave to them as a couple, what we had been giving to each of them. The next cut was probably when we dropped individual presents for our adult children and created low-cost stockings for each couple.
Keeping a Holiday budget for December, or any other, heavy giving period is not always easy, but it is worth the effort to maintain financial stability and peace-of-mind.
In closing, I hope this post has given you some specific ideas that you can adopt. Every situation and family is different, but everyone can make the Season a little more stress-free and the New Year a happier one if you can stay within a reasonable budget and diligently stick to it!