Christmas may be over four months away, but now is the perfect time to start planning and saving for your gift giving and other holiday expenditures. One of the most prominent and money-draining Christmas expenses is that of Christmas gift giving.
According to the American Research Group, Americans spent $882 on Christmas gift giving in 2015, a 2% increase from 2014 gift giving spending.
Christmas shopping can be a real budget buster without proper planning. But if you’re willing to start saving early and shop around to get the best Christmas deals, you can make sure that holiday gift giving doesn’t drain your bank account.
Here are three reasons why it’s a smart idea to start saving for Christmas right now.
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The countdown fund: Your budget will thank you
One of the easiest ways to save for Christmas gift giving is with a countdown fund. A countdown fund, also known as a Sinking Fund, is a savings account that is created for a specific purpose such as debt payoff, vacation planning or in this case, Christmas gift giving.
Let’s say you decided to save $150 per paycheck and deposit it into your Christmas countdown fund. After only six paychecks, you’ll have $900 saved for Christmas gifts.
With a little planning and an early start, you can avoid a January credit card bill by paying cash for Christmas gifts. Here are four easy steps to creating a countdown fund for Christmas gift-giving expenses.
- Make a gift-giving list in order to determine how much money you’ll need to save for Christmas expenses this year.
- Determine how many paychecks you have left before you need to make your purchases.
- Divide the amount of money you’ll need by the number of paychecks you have left until you need it.
- Either by an automatic savings plan or by good old-fashioned discipline, direct that amount of money per paycheck into a separate savings account to be used only as a countdown fund for Christmas gift giving.
By using a countdown fund to spread out your gift-giving expenses, you can ease the burden of having to come up with several hundred dollars at one time for Christmas gift purchases.
Buying with cash instead of credit can give you bargaining power
Putting your holiday expenses on credit can cost you money in more ways than one. First, you’ll have interest charges from your credit card company if you’re not able to pay the balances in full each month. Second, any late or missed payments could result in late charges or an increased interest rate from the credit card company.
However, there’s a third reason to start saving to pay cash for Christmas gifts now, and that is because cash gives you bargaining power.
Whether you are shopping at a jewelry store, department store or even dealing with a private seller — money talks. Many different types of sellers will gladly give you a discounted price if you share that you’re paying with cash and are ready to buy immediately. Store salesperson goals and increased store profits give cash buyers benefits that credit buyers don’t often have.
If you’ve chosen wisely to save early for Christmas gift expenses and have cash on hand, simply talk with the sales person you’re working with and explain that you have cash and are wondering what types of discounts they offer for cash purchases. A little negotiating can go a long way when cash is present as a bargaining chip.
Saving money in advance for Christmas gifts lowers stress
“I love when it’s here but I can’t wait till it’s over.” That’s the cry of many regarding the holiday season. The hustle and bustle of the holidays and the monetary strain it brings along with it can cause some serious stress for both individuals and entire families. Money management often brings about anxiety anyway, and that money anxiety is often amplified when a large expense such as Christmas gift giving looms in the near future.
Imagine how much less stressful the gift-giving season would be if you knew you had already set aside every dime you’ll need to cover gift giving and other holiday expenses. Knowing that January won’t bring an unwanted credit card bill with a hefty balance will make your Christmas celebrations all the sweeter. Choose to start planning for your Christmas countdown fund today and take the steps needed for a paid-in-cash, less stressful Christmas.