The Holidays Are Here! How to Still Save For Them and Start Planning For Next Year Too
Lovely fall scene!
I’ve been in a pretty jubilant mood this past week and it is due in no small part to the fact that Thanksgiving is already in a few days which means the holiday season is officially here!
I love the holiday season! They are so fun and I find them a great wrap up to the year and look forward to them every year. While the holidays are meant to be fun though, they can also be very stressful as well, especially financially.
First of all, it is totally ok to spend more during the holidays if you like! To each their own on celebrating them - some people go all out, some people celebrate more minimally, many are somewhere in the middle. The holidays however are often the time where even the best-laid spending and saving plans can be waylaid by last-minute gifts, changes in travel plans, fun holiday activities, and other unplanned additional expenses. You know what I’m going to say next - if you’re going to make changes to your spending, it’s best to make a plan ahead of time.
Over the past few months, I have been having multiple conversations with my clients on how to financially plan for the holidays while still saving for their other goals and living their lives. If you haven’t been thinking about the holidays yet though, it’s time. As November winds down and December looms, you may have checked your bank account and realized that it’s not where you would like it to be to match your high expectations of the wonderful holiday plans and gifts you envisioned for your future. But don’t worry -- you still have options!
Here are some ways to prevent and mitigate that holiday spending stress, even if you’re just starting to think about them now.
“Holidays & Hot Chocolate” sinking fund
The first option (and what I’ve been discussing with many clients) - the “Holidays & Hot Chocolate” sinking fund
This plan involves setting aside money from each paycheck to later spend as you desire for the holidays. In case you’re unfamiliar, a “sinking fund” is a separate savings account that you designate for a particular purpose, in this case the holidays, and pre-fund that goal to then spend later.
First, make an educated estimate of how much money you will need for the holidays.
An example holiday estimate might look like this:
$300 gifts
$200 travel
$200 food/activities
$700 total needed over the course of the holidays
Then divide by how many paychecks you have left through that time period (you won’t necessarily need all of the money at once - for example, while you may or may not already be purchasing food for a Thanksgiving dinner, you may not have your New Year’s plans nailed down yet, even though you think you want to do something.). For example, if you get paid biweekly, you probably still have at least 3 paychecks coming through New Year’s. If you have any irregular income coming in, you can take that amount into account as well.
This amount is how much you need to save from each paycheck. In the example above, this is $700 / 3 paychecks, or $233.33 per paycheck.
To best make this fund successful, set up automatic transfers from your checking account (or directly from your paycheck) to this “Holidays & Hot Chocolate” savings account on the days that you get paid. If you need to find a good savings account, you can compare different accounts at bankrate.com to find ones that will pay you current market interest rates for keeping your money there.
Now I realize that we are getting closer and closer every day, and it may not make sense to set aside so much money if you’re just going to spend it on Amazon gifts next week. I totally get it, and I agree. In that case, I still suggest putting this designated money temporarily into a side savings account that may actually be directly connected to your checking account (e.g. a Wells Fargo savings account or Bank of America savings account) for faster access to the money. This use case is one of the few times that I would suggest something like this directly connected savings account, but having some level of separation from your day-to-day accessible money is helpful.
Another option - revisit your goals and priorities / other savings accounts
You may already have other savings accounts designated for various purposes (not including your emergency fund!), namely “Travel”. If these accounts have their own money, it may make sense for you to consider reprioritizing for holiday expenses over other goals that are less likely or less important to you. If these goals do remain higher in priority to you, that is totally ok - consider revisiting your holiday plans and gift ideas. Here are numerous ways to rethink that - from Bank of America, Forbes, Zions Bank, and NerdWallet.
Please do not -
Put your holiday spending on a credit card that you can’t pay off right away. This is not the time to go into debt! Here’s more on how to use credit cards.
Take money from your emergency fund just to make it through the holidays - this is not what the holidays are for. Emergency funds are for the uncertain and unpredictable expenses that happen in life (emoji), not the holidays that come at the same time every year!
Do -
Follow the steps above for next year. It’s never to early to open that “Holidays & Hot Chocolate” fund! (I even get warm and cozy feelings just saying it - that name makes me very ready to curl up by a warm fireplace with a good book.) Call this fund whatever most motivates you!
Use this year’s actual holiday spending to inform next year’s holiday spending goals and savings strategy. If you spent $700 this year on the holidays, there’s a good chance next year could look similar.
A beautiful scene from a surprise winter wonderland wake up!
Now that you’re all set with your holiday saving strategy, I hope you have a wonderful Thanksgiving and great start to the holiday season! (emoji)
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Need help getting started or finding the money for that holiday spending? Schedule a free introductory conversation with Sarah here today!