Preparing for the Holidays
Buying gifts during the Christmas season can be a stressful event unless you’ve saved enough money throughout the year or can easily absorb the extra spending. Without dedicated savings or surplus cash flow, holiday spending often goes on credit or, occasionally, comes out of emergency savings. You’ve heard the warnings about spending on credit numerous times before, so we won’t belabor the point here. However, the temptation to dip into your emergency fund for decidedly non-emergency reasons (like holiday spending) is a topic worthy of our time.
As a refresher, emergency funds are wonderful tools that allow you to maintain your normal spending when life decides that things haven’t been exciting enough for you lately. Car repairs, the loss of a job, health needs, and so on can all be stressful enough on their own, especially if you’re not sure how you’re going to deal with them financially. Having a pool of money dedicated to smoothing out these otherwise turbulent events can mean the difference between being frustrated and upset to potentially derailing your financial goals. A Benefit Accumulation Account (BAA), by the way, is a fantastic option for this goal.
In our specific case today, knowing you have upcoming expenses that you can’t pay for and seeing an account with potentially thousands of dollars in it, well, it’s easy to connect those dots. Don’t do it, though. Break out the eraser and remove the line. Then, take a deep breath and remind yourself why that account exists in the first place. Your emergency fund is for—say it with me—emergencies and keeping that money saved will save you from future financial stress.
“Then, what am I supposed to do,” you ask?
I’m glad you asked.
The amount of time remaining between today and the day the gifts are needed, and how much you plan on spending, will determine how relatively painlessly this can play out for you.
Ideally, this is a strategy you implement well in advance of needing the money. Can it be done in a short amount of time? Possibly, but you may need to be uncomfortable in the process. Let me explain the steps.
- Decide how much you will spend. Like many things, a little bit of planning can prevent a number of problems. If you settle on spending $1,000 on gifts this year (which happens to be the average in America) you’ve now drawn a line that won’t be crossed. This is a key part of the process so don’t take it lightly. Determine what you can reasonably afford and want to spend and stick with it!
- Whom are you going to spend the money on? Surely you won’t spend the same amount of money on each person, but you need to know how many people are going to get a slice of pie. If you already know what you’re going to buy for someone, make a note about how much of your budget you’ve allocated to them off to the side to help keep a running balance of the remaining money. There are plenty of apps for your phone or online tools to help you if you don’t want to use pencil and paper.
- For this step, divide the amount of money you intend to spend by the number of weeks remaining until you will start buying the gifts. The resulting answer is the amount of money you need to set aside per week (preferably in a dedicated account or cash envelope) to avoid going into debt or taking money from your emergency savings. Does that weekly number look impossibly large to you? Then...
- Check your monthly budget for areas where you may be able to reduce your spending temporarily to meet your goals. Chances are the fewer the number of weeks you have available to you, the harder you’re going to need to look at your budget. This is the part where you may become a bit uncomfortable.
- If it’s just not possible to save the money, revisit both the amount of money you want to spend and the list of people you want to spend it on. Then, set a reminder to start this process earlier next year.
With a little foresight, planning for holiday spending can be done reasonably quickly. You can save a bit of money over a determined period of time and remove that bit of stress from your Christmas shopping. Again, this is where a Benefit Accumulation Account might be a helpful savings tool. You or your spouse could open a BAA and set aside just $25 per week. In a year, without any interest or Good Experience Credits that might be awarded, you would have $1,300 saved up for holiday spending.
It’s easy to get started. If you have access to the Member Portal, you can log in and enroll securely online in just a few steps. If your spouse would like to open their own BAA contact your Area Director. If you need access to the Member Portal, contact our Member Resource Center.