Christmas in July: Preparing for Holiday Spending
The holiday season is many Americans’ favorite time of the year. We travel to celebrate with loved ones. We host holiday parties. We buy gifts and decorations. And food, lots of food.
All that celebrating is expensive. The spending can really add up. As a result, many of us are hit with hefty credit card bills and debt when January rolls around.
But it’s fine to overspend as long as you pay it off, right? Maybe not.
It may take months to pay off the fees of festivity, and the added interest can ultimately make the holidays more expensive. Some of us even end up using our tax refunds to help pay off all the celebration costs.
Plus, having higher debt payments and higher bills means your options for what you can do with your money may be limited.
We want to help you avoid the holiday debt hangover.
So how do you make this winter the most wonderful time of the year without breaking the bank? Prepare now with Christmas in July. I don’t mean put up Christmas lights and break out the sleds.
I mean you should start planning and take action to make sure the holidays don’t bust your budget. Prepping your holiday spending plan now will eliminate some of that dreaded holiday stress.
Here are 5 things you can start in July that will help make your holidays free of a debt hangover:
1) Make your holiday budget
Determine the cost of your holiday events and gifts. Make those lists and check them twice.
Get an idea of who will attend your celebrations and how much money you need to make that celebration the best it can be.
2) Save for that budgeted amount
For those of us who are older, we are familiar with “Christmas Clubs.” Basically, banks would have a special savings account, often with higher interest rates, that people would use to save for the holidays.
Some banks still offer these accounts, typically community banks. But you can just open a savings account for holiday savings. You may also consider a short-term Certificate of Deposit (CD), which permits you to make regular deposits into the CD to build it up.
CDs typically have an interest penalty for taking the money early, which may be helpful to deter you from withdrawing the money before it is needed for the holidays.
Saving money every month is the tried and true method of having enough money to spend for whatever goals you have.
3) Don’t smother with gifts
Many of us parents want to make sure our children have as good a childhood as we did or a better one.
Maybe there are toys we wished we had but didn’t, so we ensure our children have those toys. But sometimes that backfires. For example, I played with the Lincoln Logs I bought for my children more than they did.
Yes, I liked receiving gifts as a child and still like them as an adult. But I don’t look back and think fondly of a toy. I look back and think fondly of family and the experiences.
One simple gift strategy is to buy four things based on want, need, wear, and read.
4) Decorations: consider a slow buildup
It may be that less is more, but if you must have more, you don’t need to have it all right away.
My parents had loads of Christmas lights and decorations when I was a child. But that is nothing compared to what they have now. Their lights and decoration prep starts in early November.
Three years ago, we moved to a property that has the space where we could have the same volume as my parents. But to get to that level, we would need to spend a whole lot of money. To do that in one year would definitely bust our budget.
Instead, each year we budget for and buy a little more. A few more lights and a few more decorations. A slow build-up also allows you to focus on quality decorations that will last.
5) Don’t let it get out of hand
With the extra time of starting your holiday plans early, there can be a temptation to save more and spend more.
Don’t forget that the reason to start in the summer is to avoid debt and control spending. Christmas in July is about preparing for the holidays. It’s not about overindulging or overspending with the extra time you have.
And remember the reason for the season. While gift giving and eating well can be important, what is really important is our loved ones and friends and the experiences we share.
Jerry Zeigler is a Navy veteran who serves service members with financial counseling and education. As an Accredited Financial Counselor®, he is a member of the Better Financial Counseling Network and is the owner of JZ Financial Management. As a tax professional and Enrolled Agent, he has a passion for helping taxpayers navigate taxes.