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Start Here: “The Ultimate Guide to Personal Finance”

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.

afraid.jpg

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?

google-trends-halloween.jpg

google-trends-valentines.jpg

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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43 Comments on "Here’s how I start planning for Christmas — in October"

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Nikhil Sharma
Nikhil Sharma
8 years 9 months ago

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.

camp
camp
8 years 9 months ago

not sure that the amazon wish list link works.

RickSF
RickSF
8 years 9 months ago
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… Read more »
Mrs. Micah
8 years 9 months ago

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….

Katie
Katie
8 years 9 months ago

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).

camp
camp
8 years 9 months ago

just FYI,

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

http://amazon.com/gp/registry/registry.html/103-0240004-2157470?ie=UTF8&type=wishlist&id=XF4KWJD1757Z

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

Akasha
8 years 9 months ago
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 Queercents.com (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… Read more »
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8 years 9 months ago

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SW
SW
8 years 9 months ago
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… Read more »
escapee
8 years 9 months ago

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!

Tyler Karaszewski
8 years 9 months ago
“Buckets” are extra complication to manage, and counter-productive in the long run. All you need is a “stack” of savings goals. Let’s say you have three savings goals. You want to save a $2000 emergency fund, $2000 for a nice flat-screen TV, and $2000 to take a trip to Europe. Say that you can afford to save $300/month. If you do this with “buckets” You can put $100/month into each bucket. When do you get to take your trip? It takes you 20 months to save your $2000. What about your TV? You don’t get it for 20 months. Your… Read more »
WhitneyDT
8 years 9 months ago

There’s no Celine Dion on your wish list! We have some you can borrow.

thisisbeth
thisisbeth
8 years 9 months ago
Tyler–the bucket and the stacking approach can go hand-in-hand. I have three different accounts for my longer-term saving plans (emergency, car, and house down payment–order of priority). I know right now that if a huge emergency were to happen, and my emergency fund didn’t have enough funding, money would be taken from the car and house funds. It’s just fun to see the three longer-term goals grow. If I would be saving solely for my emergency fund right now, I’d be a little depressed that my plans for a new house are so far away, and a little nervous that… Read more »
Amr
8 years 9 months ago

I thik saving for any occasion is a good idea!
thanks for your ideas.

April
April
8 years 9 months ago

I won’t post a million ways to give inexpensive gifts, but I will say that I don’t believe in telling people you aren’t getting anyone anything except myself. It’s rude to make that statement, and I promise you will offend people. It’s less rude to say nothing at all.

There are plenty of ways to show love and appreciation inexpensively…Google it.

noah kagan
8 years 9 months ago

This whole article is full of bs. Why are you saving until October just to buy me a burrito?

Juli
Juli
8 years 9 months ago
I’ve actually put a “Gifts” column in my budget for each month. I know roughly how much I spend on each person I buy gifts for and allocate it through out the year. I do this because I know I’m one of those people who sees something perfect and gets it right then. It works out great because I’m usually done Christmas shopping by the end of October and I can use the money that I save in my work Christmas account for a little gift for myself (or it just goes into savings). Plus, for all the people that… Read more »
Nicole
Nicole
8 years 9 months ago
My savings plan includes monthly contributions in the categories of: vacations; christmas; other gifts; and house downpayment, which totals $700 per month. I keep an excel chart with a page for each category. Each month, I transfer the total of $700 into a high yield savings account specifically for these goals (collectively). Each month, after transfering the $700, I enter the amount allocated to each category on the relevant page of the spreadsheet. If I use some of that money – for example on a gift, it comes out of the savings account, and i deduct that amount on my… Read more »
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[…] this gift-giving season. Let’s hear how you handle your holiday budgeting in the comments. Here’s how I start planning for Christmas — in October [I Will Teach You To Be […]

Matt Wolfe
8 years 9 months ago
That’s some good advice but I usually start buying stuff for Christmas in October and November to get deals and so I don’t have to think about it later. If I save up every week until Christmas, I’ll be doing my Christmas shopping on Monday Dec. 24th and by that time there’s nothing left. Not to mention, it’s no fun fighting off those middle aged ladies for my chance to get my hands on a tickle me elbow 13 hours before I’m going to give it as a gift. If you can’t buy gifts for people because you finances just… Read more »
Jim C
Jim C
8 years 9 months ago

$907 for Christmas shopping?! Yikes! No wonder the average person has so much credit card debt.

Dietdrinkworld.blogspot.com
Dietdrinkworld.blogspot.com
8 years 9 months ago
I have a “gift shelf” in my house, and I am always buying stuff year round for Christmas and Birthdays. This way I can get the best price; since I pay my cc off every month, I don’t get stuck with a crazy situation after Christmas. I actually have found this so much fun because I spend the whole year plotting just how awesome my presents will be for everyone! My husband and I usually limit ourselves to just $50 for each other, and I am always able to get 6-8 great gifts for him b/c I shop all year… Read more »
Steve W
Steve W
8 years 9 months ago
My wife finished our Christmas shopping in August (for 5 kids and others). We don’t have extra money laying around, but I do have Excel and 5th Grade Math: I total up for an entire year every major “one-off”/non-monthly expense, including Christmas, vacation, auto tax, birthday presents, insurance payments, pool membership, etc. Then I divide the total by 26 pay periods, and save that amount each pay-period to cover it. For me, those figures were $8,786.12 annually and $337.93 per pay check. In the event that my spending gets ahead of my savings, which happens, I use my emergency fund… Read more »
The Dividend Guy
8 years 9 months ago

My wife and I actually put money away all year for Christmas – it is a very important time of year for us and we want to ensure that we have the resources available to do the things that we want to do. Spreading it out over the year makes it very easy – and we don’t worry about the bills in January.

mary
mary
8 years 9 months ago

Thank you so much for offering the “buy no gifts” option. Last year I encouraged my family to institute that idea, and we wound up having such a lovely family get-together without the anxiety around a) what the hell to get each other and b) the fact that none of us can *really* afford gifts. It’s been a nice way to refocus on what we each actually value.

Moneymonk
8 years 9 months ago

I opt out of Christmas gifts altogether, I guess that explains my nice bank acct

Eric E
Eric E
8 years 9 months ago

Ramit,
I am so grateful for the advise that you continuously give out throughout the year. That is why I was going to buy you a gift from your Amazon wishlist, but “….this year, the only gift I’m giving is to get myself financially stable…”

Sorry… maybe next year!

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[…] this gift-giving season. Let’s hear how you handle your holiday budgeting in the comments. Here’s how I start planning for Christmas — in October [I Will Teach You To Be […]

Dale Swinford
Dale Swinford
8 years 9 months ago
One thing I haven’t seen mentioned yet: our “extended family” includes several “20-somethings”, as well as moms and pops and uncles and aunts. A few years ago, the “older” generation realized that if *everyone* got a present for *everyone*, it would seriously tax the kids’ finances, so we instituted a system of putting everyone’s name in a bowl and having each person pull out a name when we all get together for Thanksgiving. You are responsible for purchasing a gift for the person who’s name you drew, and no-one else. We put a strict limit on the amount (originally $25,… Read more »
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[…] Blog Articles:  Six Steps to Building a Solid Financial Foundation I Will Teach You to Be Rich:  Here’s how I start planning for Christmas in October Christian PF:  The Trick to Saving Money Moneyning:  Change Our Car Buying Behaviors and Save […]

Matt
8 years 9 months ago

I am able to save by keeping several no cost or at least very cheap and frugal hobbies. As long as you can keep yourself occupied cheaply, this is all that matters.

I restore junk furniture.
I program games using free software tools.
I build websites and try and host them at home.
I am attempting to build a company on nothing, it may not work but
it is fun to try.
I train my dog and cat to do tricks. Cat hasn’t learned much.

Linda V
Linda V
8 years 9 months ago
I like to buy gifts throughout the year when I see the “perfect” one. Which is sort of like saving all year for Christmas. HOWEVER, I still do save for Christmas, because EVERYTHING is on sale, and I have a list of “We Needs” and I buy for the house in December while everyone is slashing prices to entice the Christmas buyer. It is the BEST time to get that extra or new TV or DVD player, I-pod, laptop, bedroom comforter, lamp set, etc. Most of my business wardrobe is purchased before Christmas as well. It used to be so… Read more »
linda
linda
8 years 9 months ago
I am 57 years old and I rarely do much for Christmas. My parents have every thing they need or want. So I do not send them anything. They have suggested this. For my kids but I give them a real special gift. I live on the West Coast and they live on the East Coast. What I give them is a $50 gift certificate for Southwest Air for Christmas and a $25 gift certificate for them for their birthdays. That way they have some money to help them come visit me. For the boyfriend I buy him a book… Read more »
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[…] Speaking of Christmas, here’s how Ramit plans for Christmas in October. […]

aimee
aimee
8 years 9 months ago
My husband’s family is pretty materialistic and attempts at limiting gift giving to one person drawn from a bowl haven’t worked. So we have to buy for twenty people just on his side, and they have everything to begin with. I stopped buying individual gifts for them years ago and instead buy each couple (aunts/uncles etc.) the same thing. Last year we made calendars on Shutterfly for $15/each. This year’s gift is a crystal ornament set from Pottery Barn. I found them online back in February marked on clearance from $40 to $10 each. I bought ten for $100. Bonus:… Read more »
Phoenix
Phoenix
8 years 6 months ago

Use your Christmas Club account. Nearly all credit unions have one. The money can be automatically deducted starting in January and is “set free” for you to use in November. The cycle starts all over again in January. (may be different for each credit union)

Beestro
8 years 4 months ago

Well guys, I didn’t expect to see anything like that here. It’s amazing. So many shocking news on one website. I’m not sure I can agree with everything , but I’m totally astonished by this words. To be honest, I have never heard this kind of information online. It’s really something very special.

one million euro blog
8 years 3 months ago

Great Planning!

with my best wishes.

trackback

[…] go out there and make some plans this Christmas! Party down with your friends and remember what the spirit of Christmas is all about. It is the […]

Elizabeth
9 months 4 days ago

I save year-round for it! A little each month goes a long way. But thanks for the tips!

Jack
6 months 2 days ago

I will right away seize your rss as I can’t to find your
e-mail subscription hyperlink or newsletter service.
Do you’ve any? Kindly allow me know in order that I could subscribe.
Thanks.

Jeremy Brown
3 months 5 hours ago

It’s never too early to start planning Christmas! Plan your holidays budget with http://inbudget.net. If you decide to go to Paris, New York, Sydney, Bangkok or Moscow, try to create your first budget encompassing all places you visited, photos you made, links you followed – all the range of locations where you stayed, ate, had fun. If you share the budget with friends, they will be able to add it into their calendar and repeat your unforgettable journey.

monetiza tu blog
2 months 11 days ago

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