I guess I didn’t really know how it would go, but this Christmas came and went just as quickly as the others before it. However, the big difference this year is that Christmas won’t be lingering in the form of credit card debt or budget regret. I can’t even begin to express how good that feels!
We didn’t plan all year long and we didn’t start saving last Christmas, but we did sit down in November and make a plan for Christmas- and we stuck to that plan. We took a portion of the money that would have gone toward extra debt payments in December and budgeted $800 for Christmas. That included gifts for everyone on our list, cost of food for hosting Christmas dinner at our house, and a little extra padding for unexpected expenses. I am happy to report that we came in under budget, by about $90.
This is the first Christmas I can remember that we didn’t use a credit card and didn’t over spend. Working with a budget for every person on our list was quite liberating. It made it easy to decide what to buy for someone- if we planned to only spend $25 on someone we wanted to make sure we got the best value we could for the money.
What to do if you took on debt to pay for Christmas this year:
If you had to use credit cards to pay for Christmas this year, don’t beat yourself up over it now. Recognize the mistakes you made and take action TODAY to prepare for next Christmas and to be ready to handle it with cash. If you don’t have one yet, open a savings account for Christmas. Call it your ‘Christmas Fund‘ and only use the money for Christmas. Decide now how much you need to spend for next Christmas and divide that total by 11 or 12 (decide if you want to count this month or start in January or whatever). The best advice is to set up an automatic transfer each month for your monthly Christmas Fund contribution so that you won’t even have to think about it. Personally, I don’t like to set up automatic payments or transfers for non-essentials so I will manually move the money each month- decide what works for you here and what you can safely commit to doing.
An example– I opened our Christmas Fund yesterday (with ING Direct) and funded it with $50. I chose $50 because I always start my new ING savings accounts with $50 (no particular reason for that). We have decided to budget $1,000 for next Christmas, which leaves $950 to save from January through November (11 months = $86.36 per month). That’s it! Next Christmas is taken care of! Of course I need to make that transfer a part of my monthly budget, but we can afford it so that won’t be a problem. So whatever your budget may be for next Christmas, decide it now, plan for it now, and get started TODAY! I promise you won’t regret it.
Remember, by preparing for next Christmas now, not only are you taking control of your money and making it work for you, but you are reversing the damaging effects of interest that you would be paying to a credit card company and actually earning interest all year long on your savings account. Compound interest working against you is the enemy of financial freedom and wealth. Compound interest working for you is your greatest ally in changing your financial future and becoming wealthy. This distinction is probably the greatest difference between the poor and the wealthy- don’t let this be another year that you move in the wrong direction.
Best of luck and Merry (cash) Christmas! 🙂