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I know that the holiday season was just last week and the last thing you probably want to think about is next Christmas.  The holidays are a time of fun, travelling, going to parties, eating, and gift giving – in short, it involves a lot of spending.  If you don’t want to be overwhelmed with the stresses of the season, or more importantly, if you want to pull off Christmas without having to go further into debt, this blog post is for you.

There is no better feeling than having finished shopping for Christmas knowing you did not incur any new debts or that you won’t have to pay off a credit card balance with interest over the next few months.  Setting up a budget and knowing what you are going to spend over the holidays is a great plan to have in place.  Having a budget alone may not stop you from accumulating debt with all the holiday cheer however.  Recent statistics show that a whopping 77% of people have overspent on their holiday budget every year!  Even the best laid plans often go astray when it comes to holiday gift giving.  To remain debt free you have to have a plan and the will to stick to it.

Create a gift giving list and set a budget for how much you want to spend on each person this year.  Figure out how much you plan to spend on meals or travel and account for all expenses that will occur.  Are you going to buy new decorations this year?  Is this your year to travel to see family?  Is family coming to see you?  There are so many different things to consider when planning for Christmas that starting early in the year makes the most sense.

In 2016, the average Canadian family spent $900 on Christmas.  This included gifts, meals, travel, and decor.  When was the last time you had $900 just sitting in your bank account waiting to be used for the holidays?  If your answer was “never”, then you are in the same boat as the majority of people out there.  More people every year use credit to fund Christmas and these forms of payment costs you in interest.  In order to have a debt free Christmas you have to have a plan and that plan includes starting to save early.

Saving for Christmas early will help make it more manageable and stress free.  By beginning to save now you can break down the total into smaller portions which can be a lot easier to manage month to month.  If you want to save $900 between now and December 1st (assuming you will have 24 paydays between now and then) you would have to put aside $37.50 every two weeks.  $37.50 a payday sounds completely reasonable and manageable compared to $900 over two paydays.  If you skip a few coffee runs and a couple of lunches out you can easily put that money aside each week and begin blazing a trail to having a debt free Christmas.

There are basically two different methods to save for the holidays (or saving for anything for that matter).  Which one you choose to use depends on your habits and level of discipline.

Saving Option 1 – Savings Account

The first option is a separate savings account at a bank of your choosing.  Personally, this option is my favourite.  It can be automated so that you don’t have to constantly remember to save the money.  You can make accessing the money more difficult by limiting your debit card when it comes to the savings account.  You will also be making a little bit of interest on the money you manage to save each month.  Don’t get me wrong, the interest will be minimal and is hardly worth talking about, but it’s something.

Talk to your bank about setting up an automated transfer every payday into your savings account and make sure the bank limits your debit card so that the savings account cannot be accessed via debit at the store.  Before you know it, the money will be growing into something you can use when the time is right.

Saving Option 2 – Cash Envelope System

The second option is very simple.  Get yourself an envelope; put it in a safe place, and every payday put the money you want to save into it.  It’s that simple.  The good thing about this plan is that you don’t have to bother with the bank if that’s not your thing.  And if you don’t get paid on a regular basis you may not want to have the bank computer automatically take money from your account.  The drawbacks, however, are that it can be very tempting to dip into the cash envelope and it is readily accessible whenever that temptation hits.

This system is only for people who have a great deal of self discipline and can resist the urge to spend the cash that has built up.  If you have any inclination that you might dip into the savings sometime during the year, this is not the system for you.

People who rely on credit to fund the holidays find themselves paying for the purchases well after Christmas is long gone.  Statistics report that holidays spending on credit can have people paying off that balance well into June or July.  That’s a long time to pay for one gift giving day a year and the interest the credit companies make is astronomical!  Stop giving your hard earned money to the credit companies and start investing in yourself instead.

Having cash set aside to pay for Christmas is the best gift you can give yourself this season and there is no better time to start than right now.