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Note to self: Start saving now for the holidays
If you’re still paying for holiday spending, don’t feel bad – you’re not alone. Many Americans run up end-of-year debt in celebration of the holidays, only to realize the harsh reality of the bills that follow.
A recent MagnifyMoney survey showed that consumers totaled an average of $1,003 in debt during the 2016 holiday season and that nearly half will take four months or more to pay the tab. More distressing is that 12 percent plan to make only minimum monthly payments, meaning it will take five years – and more than $400 in interest – to pay off their debt.
Plan ahead for less stress
Real problems can occur when the calendar turns to a new holiday season and debt from the previous year is still on the balance sheet. Stacking debt on top of debt has resulted in financial woes for many people. Planning ahead can help anyone break out of this vicious cycle and make the post-holiday period much less stressful.
More than 75 years ago, the concept of a “Christmas Club” was born during the Great Depression when banks promoted a concept that encouraged customers to deposit a set amount of money each week into a savings account. In December, those deposits would be returned to the customers, with interest, to pay for holiday expenses.
Today, the same general concept can work wonders for you.
A debt-free holiday season?
Let’s say that you expect to be on par with the average holiday spending of about $1,000. If you put aside a monthly total of $112 starting in April, by December 2017, you’ll have $1,008 saved to spend in December.
Following this simple plan, you won’t accrue debt to pay for the holidays and you’ll set the stage for an even easier formula in 2018. If you start saving in January, you only need to set aside $84 a month to have more than $1,000 in hand by year’s end.
You can open a separate account and earn a little interest if you like, or simply keep those funds in your primary account, but make them off limits until needed expressly for holiday expenditures.
Buy gifts ahead of time
Another idea that many holiday savers have noted works well is purchasing gifts year-round. Often, shoppers can score much better deals during sales in say, May or June, than if they wait until the December shopping rush to purchase the same items.
If you have set aside savings for Christmas, Hanukah, Kwanzaa or New Year’s spending, feel free to dip into those funds during other times of the year if needed to pay for holiday expenses. Just avoid the temptation to expend that money for non-holiday costs.
Does it make sense to pay off your existing holiday debt?
If you are still carrying holiday and other credit card debt and don’t see how you could start a saving plan right now, consider a lower interest debt-consolidation loan. This would allow you to focus on making a single payment each month so that you won’t be cash-strapped and are on track to eliminate the original debt while avoiding new obligations during the holidays.
Make a plan and start today. Saving for the holidays doesn’t require a major lifestyle adjustment for most people. Figure out what you can afford (and want) to pay for the holidays, divide that total by the number of months remaining on the calendar, put the money aside on a regular schedule and stick to it.
How much you wish to save may be more than the national average or less. That’s up to you. Either way, come December, you’ll be glad you planned ahead.