It has been a long long while since I have posted anything related to Thrifty Thursday. Somewhere along the line, I began to steer away from posting about how to save money and be an organized budgeter. Due to some comments and e-mails I've recently received from readers, I am going to attempt to focus on these topics a little bit more.
Did you know that there are exactly 133 sleeps until the guy in the big red suit will be jumping down our chimneys? You might think it is rather early to begin thinking about Christmas but if the picture below depicts how you feel about the holiday season, you may want to keep reading.
I love the Christmas season and all that brings. I begin to think about Christmas on, let's see, December 26th. Usually mid-way through the summer I start to get really excited about what will take place during the next holiday season. However, at the same time, I find that Christmas can be a financially, and in turn, emotionally draining time. Even more than that, I often experience a mild case of the post-Christmas blues in January and February. Therefore, for me, there is nothing worse than trying to figure out how to pay off all the Christmas expenses as I enter the new year, seeing as I am already somewhat gloomy about Christmas being over.
In order to ensure that the financial burden of Christmas does not overwhelm me, I have to prepare early. In this post, I am going to share with you how I go about doing this. Please remember that what I do to budget for Christmas may be very different than what you do because each of our our financial and employment situations are different. Perhaps what I do won't work for you but I hope that you can find at least something helpful in this post.
So, last week when I sat down to start getting ready for Christmas this is what I did.
1. Make a budget - Begin by writing down all the expenses you anticipate having at Christmas. My categories were as follows: hospitality (includes: food, baking, decorations, Christmas cards and postage, wrapping expenses), gifts for my family, gifts for FD's family, gifts for others and traveling expenses.
After compiling the list of expenses, I prepared an excel spreadsheet to keep track of them. I set a limit for each category and then broke them down further. For example, there is a total limit for gifts for each family and this is further broken down into a limit for each individual. There is a total for the hospitality budget and then a limit for each category.
In my spreadsheet, I have it set so that as I enter each purchase it will adjust the amount I have left in that area, the category and the total Christmas budget. For example, when I buy the postage for my Christmas cards, I will enter that amount onto the proper line and my spreadsheet will calculate how much I have left for postage/Cards, how much I have left in the hospitality category and how much I have left in total. This way, there is a bit of wiggle room in case I need to go over or under in some categories. The main goal is that the overall budget will always balance.
2. Be realistic - Think back to previous years when estimating how much money you will need to allot for each category. Be realistic. If you know you will be doing a lot of entertaining, then add more to the food category. If you know you love to have beautiful wrapping paper, bows and tags, give yourself room here. Think back to what you already have. For example, last Christmas I bought a lot of wrapping supplies on boxing day clearance. Therefore, I knew I didn't need to allot much here but I did not get Christmas cards on clearance so I needed to plan for that.
3. Overestimate - Be generous. If you are unsure of how much you will need in a specific category, it is better to overestimate than to underestimate. When all is said and done, you will be better to have allotted more for holiday food and have money leftover than to have budgeted too little and be scrambling to find the money to cover your expenses.
I budgeted quite high in the food and baking category. Since it is only August, I have no idea how many events/dinners/parties and so on I will be hosting so I ensured that I left myself enough wiggle room. In the event that I do less hosting than I anticipate, I will have money leftover to cover unforeseen expenses or to go back into savings.
4. Figure out how you can make it happen - Once you have your budget and/or spreadsheet set up, you will see how much money you need to have available to you when the holidays roll around. Figure out how you can make that happen in the months left before Christmas.
For us, this looks a little something like this (remember: each of our situations is unique and what works for me may not work for you)...
Our bank was recently offering as Easy Save program where a set amount of money will be transferred to a savings account each time you use your debit card and/or ATM machine. We set it up so that 2.00 will be transferred each time we use debit or ATM. Each time we reach $100 in the account, the bank will give us $10. The savings account that it is being transferred to is not our normal savings account, but one that is being used solely for this purpose. We set up the program so that we do not have access to this savings account through our debit card or ATM machine (i.e., we have to actually go into the bank if we want to access this money). Having the inconvenient access to the money decreases the likelihood of us dipping into it "just because".
Secondly, in September, when school begins, my contract will be renewed and I will start working again. Since we become accustomed to living on one income through the summer, the majority of my paycheck goes into our pre-existing savings account. This year, when I go back to work, I will transfer the first few paychecks to the Easy Save account instead.
From the accumulation of each $2.00 transfer, the $10 gifts from the bank, and one or two of my paychecks, we will have more than enough money in that account to cover our Christmas expenses by mid-September.
This account will become our "Christmas Account". When the time comes for holiday purchases to begin, we will go into the bank and ask them to set up debit card access on the account. Then, whenever we are making Christmas purchases, we will use that account rather than our normal day-to-day account. Knowing the money will already be sitting there waiting for us will take an enormous amount of Christmas stress off of our shoulders!
5. Stick to it. When you are doing Christmas shopping, take a few minutes when you get home to sit down with your receipts and enter the purchases into your spreadsheet so you know where you stand with your budget. Don't fret if you go over budget in one or two categories, just look through and determine where you can cut expenses. Sometimes if I get a bit off track on a budget, I end up throwing the entire thing out the window. Not this time! The main goal is to ensure that your total budget is balanced.
Another thing I am going to try hard to do this year is to keep Christmas purchases and regular purchases separate. Considering we are using a specific account for all of our Christmas purchases, this shouldn't be hard. Budgeting can be difficult if you don't know where you are spending your money and you have to sift through receipt upon receipt to figure out how much you are spending in any given category. This year, if I am shopping and have a cart that is half full of Christmas purchases and half full of regular household purchases, I am going to ask the teller to ring them through separately. I don't really care if this makes me a pain in the butt, it will help me stick to my budget because it will be so much easier to input the purchases into my spreadsheet if all the Christmas purchases are organized.
6. My last suggestion is to find what works. Maybe nothing I said here is helpful to you due to your own personal situation. If that is the case, find a system that works for you. If you already have a system, I'd love to hear about it. The important part is finding something that works for you and your family.
To recap, here are my steps to ensure that Christmastime stress will be minimized and that we will not be paying for Christmas 2009 in March 2010!
1. Budget 2. Be realistic 3. Overestimate 4. Make it happen
5. Stick to it 6. Find what works
Turn this ....