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Effective personal finance is all about being prepared right?
We need to be prepared for a layoff, prepared for a major home expense that pops up out of nowhere. If I bail while snowboarding (trying to keep up with friends who are way better than me), I need to be prepared if I’m off work for a month healing.
Having an emergency fund is fantastic, but it’s not enough. There are things that come up all through the year that you need to be prepared for. Your car insurance is going to need renewing, it always does. Are you saving enough every month to get it done? Are you putting aside cash to replace your old couch that’s falling apart or are you planning to put it on the Visa? That’s commitment to your finances.
I’ll admit that I’m not the best at this sometimes. When our dishwasher blew up and ruined our kitchen a few months ago, I definitely was not prepared. The insurance company covered some of the damages but we were still left with a hefty bill.
Of course that’s a unique situation but there’s one thing that comes around every year and it always seems to catch people off guard – Christmas.
When should you start saving for Christmas?
The best time to start saving for Christmas is January. That gives you a full year to sock money away and doesn’t strain your wallet so much near the end of the year. The second best time is now.
Christmas happens every single year and still many of us behave like we’ve never heard of it. Every year parents max out their credit cards to buy their kids the latest toys and trends, (sometimes I wonder if it’s more for the parents than the kids) and it comes with a cost.
This is not accounting for parents, siblings, aunts, uncles, extended family, turkey dinner, decorations blah blah blah. It’s easy to see how Christmas credit card spending gets out of control. Many people spend a good chunk of the following year paying back Christmas debt and accumulated interest.
You might be thinking: ‘that’s great Mike…why are we talking about Christmas in July?’
Simple – you should start saving up for Christmas now. I would encourage you to find a quiet spot (if you have several kids like me, that might be on your roof or at the library) and write out your projected expenses for Christmas.
Here’s are some expenses to consider:
- Gifts for your children
- Gifts for your spouse
- Gifts for extended family and friends
- Costs associated with fancy dinners and hosting
- Are you off work over Christmas? If you’re not on salary budget that lost time in
Write down how much you think you’re likely to spend on each of these things. Add all of the numbers up and add 25%
Now you have a real tangible cost for all of your Christmas expenses. Next, figure out how many pay periods you have remaining until Christmas. Divide your expenses by the number of pay periods remaining and you now know how much to put aside from each check to cover the costs.
Can’t afford it? You’ll need to cut from somewhere! Here are some ideas to reduce your costs.
- Consider getting just one great gift for each child rather than several.
- Nobody is going to judge you if you host a potluck instead of buying everything yourself. Life’s expensive, people get it.
- See if you can pick up some extra hours at work in the months prior.
- Sell something that you don’t use and put it toward Christmas. I recently got over $100USD on EBay for an old wrench set that I never use.
If you take the time to plan now, you won’t risk being one of those folks who is still dealing with Christmas 2017 on their credit card at this time next year.
Planning is the key to success when it comes to finances. If you’re going to bother with an emergency fund, preparing for things that may or may not happen, why not prepare for the things that are definitely going to happen?
Question for you:
When do you start financially planning for the holidays?