Now that Christmas has come and gone once again, it’s time for the reality to set in. For many people, the typical way to pay for Christmas gifts is to charge it all to credit cards and then spend the next year (or more) trying to pay it all back. That’s the ‘normal’ approach. If you want to master your finances and eliminate the stress associated with having debt, you need to intentionally control your money and plan ahead. There is a much better way to pay for Christmas than using debt.
Be Intentional: Create and Follow a Plan to Pay for Christmas
I used to do the same thing as everyone else when it came to Christmas shopping: go out shopping, but whatever I wanted to get for people, and charge it. I didn’t really have a plan, other than knowing who was on my list of gift recipients. The result was that I always spent more than I expected to, and always ended up in debt. While I didn’t go crazy with my shopping, I ended up in debt nonetheless.
As part of our plan to eliminate debt and control our finances, my wife and I formed a new plan – one that results in significantly less stress and no debt. Each year, my wife and I create our Christmas budget. We list everyone for whom we will buy gifts, along with the budget specific to each recipient. Next we add a line item to the Christmas budget for the unexpected gifts. Then we add a few hundred dollars as a cushion, since we buy some gifts earlier in the year. Finally, we divide the total by 12 – the amount we need to put into our annual Christmas fund each month.
In order to make it easier to manage, we also have a separate checking account dedicated to our Christmas fund. We set up an automatic monthly transfer to move the monthly Christmas savings amount discussed above into the Christmas checking account. Whenever buy buy anything for Christmas, we track it in the budget (per person) and transfer money back into our normal checking account to cover it.
If we want to spend more than budgeted for someone, the money has to come from somewhere – the point is to control your money. So if we want to spend more, we pull the “extra” from somewhere else in the budget. The result is that we never spend more than we have, we stay out of debt, and Christmastime (and the months following) are not spent stressing about how to pay off the credit cards.
Shopping for birthdays and other gifts can be handled the same way. We use the same process as for Christmas, complete with a “Gifts” checking account.
This year, consider using a plan to pay for Christmas (and other gifts) without debt or stress.