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.
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