Guest article by John of Frugal Rules dot com
Save Money-Shop Worry Free all Year
Barb wrote a wonderful post last week on 7 Holiday Shopping Tips and she kindly asked me to share how my family and I manage our holiday shopping expenses. Holiday shopping can be an expensive endeavor; a recent statistic shows that families spend $743 per year on Christmas gifts (as of 2010). I know some personal finance bloggers might crinkle their noses at this but, my wife and I spend about $950 per year on holiday shopping and do it completely worry free, largely because we know where the money is coming from.
Plan Your Holiday Shopping in January
Anyone who knows me well knows that I love to budget. I firmly believe that if you’re going to make financial headway you need to know where your money is going. Not only does this include everyday things like housing, groceries, and utilities, but it also includes spending for other events throughout the year. Every year my wife and I analyze our budget to see what changes need to be made during the year. We’ve been budgeting long enough now that we usually only need to make minor tweaks. Since holiday shopping is a major expense, we include that as a line item on our budget.
Sock Away Money Throughout the Year
Not only do we budget, but we use the envelope budget system. Remember how I said we budget $950 per year for holiday shopping? Well, each month we withdraw $80 from our checking account and put it in our envelope marked “Christmas” and the money sits there waiting to be spent. Now, many people are not fans of the cash system; that’s okay because you can still use this method without the envelope system. You can set up a separate savings account for the funds or you can simply keep them in your usual savings account to be used for holiday shopping. When it comes time for us to go holiday shopping, we can do it worry free because we know where the money is coming from. Additionally, we make our money work further as we use our credit card to earn reward points and then pay off the bill the following month with the cash we have saved. I know it might seem like a lot of work, but it really isn’t and it allows us to shop worry free.
My wife and I started using this system shortly after we were married, 11 years ago, as we found that our large family enjoyed exchanging gifts over the holidays. With that in mind, we knew that we needed a system to help us stay fiscally disciplined while at the same time allowed us to enjoy the season. Now that we have three children, it’s even more important to us as shopping during the holidays can begin to add up. As parents, we’ve learned that grandparents love buying Christmas gifts for our kids. After the first holiday season, we held back a large amount of what we originally budgeted for our kids and now use it for other fun child related things throughout the year.
Can I Apply My Holiday Shopping Strategy to Other Areas?
You bet you can! The view we take with our budgeting is useful for both short and long term spending. The same budgeting strategy we practice for Christmas can also be used for other irregular expenses.
My wife and I have been blessed to take two amazing cruises to the Southern Caribbean – one in celebration of our fifth wedding anniversary and one to celebrate our tenth. We saved a little bit each month and set aside money from our tax returns for years to save up enough to enjoy two very nice cruises. Another way we apply this strategy is toward transportation. We know that a newer car is important since we have a growing family, so we automate our vehicle savings each month. We know that retirement investing is important as well, so we automate as much of that as we can.
The takeaway is that whether it’s holiday shopping or saving for that next vacation, it will not happen overnight. Future spending goals take time to reach and time to save for. I know that if I had to plunk down nearly $1000 for holiday shopping, it could be done, but it would be painful and foolish.With discipline and year round saving we accomplish all of our financial goals, whether it was having cash for holiday shopping or saving for a car purchase.
John is the founder of Frugal Rules, a finance blog that discusses investing, budgeting, and frugal living. John is a father, husband, and veteran of the financial services industry who’s passionate about helping people find freedom through frugality. Visit him at frugalrules.com or follow him on Twitter.
How do you budget for your holiday shopping? Do you save money throughout the year or do you wing it?
image credit; vintage living magazine-google images