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Here’s how I start planning for Christmas — in October

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[Update 2]: Welcome Lifehacker readers! See my most popular posts here.

[Update 1]: New graphics added below.

First, let me say that there is nothing more soul-crushing than walking into a store and seeing Halloween pumpkins up in July or Christmas elves milling around in October. But I do have to admit that there’s something catchy about those Mariah Carey Christmas songs. Ok, now that I’ve brought into question my entire sexuality, let’s look ahead a couple of months.

Come the first week of January, people will start getting their bills from Christmas and will start wondering what the hell just happened. Did they really spend $907 — the average amount spent on Christmas gifts — this year? Don’t forget to factor in travel, food, etc.


That’s why I think Christmas really starts in October. On the first of every October, I start saving for the Christmas gifts I’m going to buy. I don’t know exactly what I’ll buy, but I have a ballpark amount in mind. Let’s just say it’s $500.

How do you save for a specific event? Two main ways: Make more money or cut costs (i.e., re-allocate your spending from one thing to another). In this case, I decided to re-allocate some of the money I save for a house towards Christmas gifts.

By starting in October, I have three months to save, which makes it about $42/week. If I had waited until the first week of December, I would have had to save $167/week. As usual, whether saving or investing, time is your friend.

This whole concept of saving consciously and early isn’t limited to Christmas gifts.

SEOmoz, a website about search engine optimization, highlights trends in search terms for special holidays. If you were looking to grow a site’s traffic, when might you start planning?



Answer: Ahead of time. And planning ahead applies to your money, too.

How Christmas saving applies to all of personal finance:

  • When consciously saving towards a targeted goal, starting earlier means you actually have to save less per month than if you start later (see a spreadsheet of how this works)
  • In your savings account, set up buckets of what you’re saving for, like “new house” or “Christmas gifts.” Don’t bother with fancy software to do this — just use a separate Excel sheet or write it on paper. Having specific buckets within your savings account make it much clearer what the money is for, rather than having some amorphous blob of money that’s sitting there waiting to be raided.
  • Most people will never plan ahead and will complain about how they never have any money. This is true of Christmas gifts and life.
  • “But Ramit,” you might say, “It’s already November! I can’t do this now!” This is the Shrug Effect and, if you say this, you are a moron. Would starting last month have been better? Yes. But starting now is better than not starting at all.

As always, one of the primary differences between rich people and ordinary people is saving before you need to.

Or…opt out of Christmas gifts altogether
I’m constantly astonished how many people who don’t have the money feel the need to buy gifts for other people. If you’re not financially secure, I honestly believe the best gift you could give would be to say, “Hey guys, this year I decided to be brutally honest with myself and admit that I can’t afford to give any gifts. So this year, the only gift I’m giving is to get myself financially stable.” Wouldn’t your family and friends appreciate that more than some crappy trinket or pair of earrings from Claire’s? If my future son or daughter ever says that to me, I will fall in love with them…when they are around the age of 24 or 25. Now my future kids have a clear path to earning my love. God, I love it.

Btw, on a completely unrelated note, here’s my Amazon wishlist of 553 items.

PS–Send this to your friends who always overspend on Christmas gifts and then complain about money problems.

Don’t miss my next post

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  1. I think this is right on. When I do this, I will break up the christmas savings into even more sub-divisons: gifts, stationery, decorations, tree, etc. I wouldn’t want to save some amount and then suddenly find out I can’t give a friend the gift s/he wanted because I wasted the last $x I had on hallmark cards.

  2. not sure that the amazon wish list link works.

  3. I think saving for Christmas (or any known expenses) early is a great idea. To take it even further- you can also use that extra time to get better prices on the same items, because you don’t have the time pressure. A few practical examples: if you know there are periodic sales on the gift you want you can keep checking flyers for a few months. If you are bidding on something on EBay you can afford to wait for the next auction if the price gets too high. If you are shopping in Dec you won’t have the option to wait for a sale or opt out of a bidding war time pressure will cause stress as well as costing more money.

  4. We opted out. We’re not financially secure or stable enough to give gifts to everyone. And we don’t want to show favoratism. So we’re going to spend time with both families (which we know our parents will appreciate at least as much) and I’m working on a project to honor my grandfather on one side who passed away several years back as a kind of present for that side.

    Now that I think about it, maybe I should do something next in honor of the other one, who passed away more recently….

  5. Last year, I baked bread and made meals that I froze and then gave to family members for gifts. It saved us a lot of money, and they appreciated having food on hand (and one less trinket to sit around their houses).

  6. just FYI,

    i think the link to *your* gift list is:

    the other one just takes me to the generic registry page.

  7. As a recent graduate with a huge pile of student loans to pay off for the next ten years I’m beginning to get really conscious of how I spend my money. I discovered weblogs such as yours and (which offers a lot of good advice, even if you’re straight – money appears to be sexually-neutral) and things have snowballed. I’m budgeting my expenditures and saving my pennies. Around mid-October I realized I should start a savings fund if I really wanted to buy all of those gifts this Christmas that I plan to. Thus, I’m putting roughly $50 in a separate account each week to save for the big day. This may sound corny, but it’s honestly thanks to people like you, Ramit, who offer simple advice to everyone about money. Sure, I was saving money before, but it was going into one sort of blobby account. I don’t necessarily know what all that money is going to be for and at times I felt like I didn’t need to put as much into it because I couldn’t clearly define what I was saving it for. Now that I’m actually taking a hard look at my finances, it’s really making a lot more sense.

    Anyway, to make a long story short – I totally agree with you on this – the longer you save the more you’ll have to spend OR the less you have to put in each week to get to that number you want to spend. Great post!

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  9. We use the biweekly system to get two paychecks worth of extra savings each year (one goes to X-mas, one goes to taxes). If you get paid biweekly (instead of once or twice a month) there are two months each year where you’ll get an extra paycheck. For us, there are two known expenses each year that are more than the norm: taxes and Christmas. So one of the extra paychecks (usually march or april) goes to paying whatever we owe in taxes while the left over pads some savings accounts and the other (usually sept/oct) goes to paying for our Christmas budget. It’s great, because Christmas is paid for before we even get there and it really cuts down on the stress.

  10. oh no you didn’t, Ramit!

    this is similar to your post about saving for weddings, and it explains a good idea if you are going spend so much money on this type of stuff.

    BUT- now you are going to get a BILLION comments on the theme of “how I made/bought cheap christmas gifts”. Have fun reading them all!