You know the routine…every New Year after we deplete our accounts or get that credit card statement, we make a resolution to not dig ourselves deeper into debt during the holidays ever again.
Well my friend, here’s your opportunity to achieve a different result.
How so? I’m glad you asked.
This week open a savings account specifically for the holidays. I know it seems early but trust me. When it comes to savings, time and compound interest are your best friends. Unfortunately, when it comes to debt, your best friends quickly become your worst enemies, but we’ll discuss that in a different post.
Now, here are a few guidelines for this savings account:
- It needs to be separate from your emergency fund and the account you use to pay your regular living expenses (no mingling of the money).
- The amount you set out to save depends on your spending habits during the holidays. Some things to consider include:
- Will you be traveling – food/drink, transportation and room cost
- Will you be hosting dinner/events – food/drink, supplies, new outfit(s) and venue cost
- Will you have visitors staying at your home – food/drink and entertainment cost
- Who are you buying gifts for – do you have a list and set purchasing limit
- You may want to research opening an online, high-yield savings account, instead of an account at your local bank or credit union. High-yield savings accounts usually pay more interest and you won’t be as tempted to dip into the account for unintended purposes (out of sight, out of mind).
- Once the account is established, set up automatic deposits directly from your paycheck or from your main bank account.
Think about it, if you commit to saving $25 per week for the next 5 months, you’ll have $575 (plus whatever interest). Now this is just an example. As I stated earlier, the amount you choose to save will be dependent on your individual circumstances.
Just in case you’re trying to figure out how to find extra money to save, here are a few suggestions:
- Cancel unused subscriptions/services (e.g. the gym membership you aren’t using, cable [research less expensive streaming services] …).
- Cut back on eating/drinking out; take your lunch to work and make coffee at home.
- Cut back on (or quit) smoking/drinking.
- Reduce your grocery bill by meal prepping, based on weekly sales; make a shopping list and stick to it. And never go shopping while hungry.
- Reduce your visits to the casino and other extracurricular activities.
- Reduce your visits to the hair/nail/barber shop.
- Shop around for lower rates (e.g. insurance, cell phone, lawn service…).
- Stay home more to save on gas and entertainment cost. Invite friends over to socialize instead of going to restaurants/clubs (BYOB, potluck…).
- Utilize your local library for books, movies, music, and other free services
Depending on what all you have going on, there are probably numerous other ways for you to accomplish building your savings account. It’s just a matter of taking the time and effort to really think about it. Also, having a written budget helps make it easier to identify areas in which you can cut costs.
After the holidays, you can continue contributing to this account and use the money for other predetermined purposes, like a spring break trip, summer vacation, or school supplies/clothes. And around mid-year start saving for the holidays again. The main point is to modify our behaviors to be proactive, instead of reactive. Failure to plan and save today, often leads to borrowing and debt tomorrow.
Let’s stop the insanity!
“Doing the best at this moment puts you in the best place for the next moment.” -Oprah Winfrey
