Christmas is just around the corner, and most people probably find themselves in somewhat of a panic. One group doesn't know how it will pay for Christmas, and the other group will quickly realize that they have overspent on Christmas.
Both groups will be tempted to whip out a credit card in order to split the difference.
Don't be among them.
Instead, I would like to propose a simple method of paying for Christmas. But you cannot embrace this method unless you realize the fundamental problem at the heart of it all:
You are your own worst enemy!!!
You are not as good with money as you think you are. If you've ever closely tracked your spending and made a budget, then you know what I am talking about. The moment you start ignoring the constraints of your budget because you think you are "fine," is the very moment you will start to overspend, and will ultimately start coming up short financially.
The first thing you need to do is to make a budget.
Decide ahead of time how much money you are going to spend on Christmas every year. As Dave Ramsey says, "Tell every dollar where to go instead of wondering where every dollar went!" Your money needs to have a name. Assign it one on a spreadsheet, and use it to track your monthly spending.
The second thing you need to do is automatically save.
You will need to start saving a small amount of your monthly budget and setting aside funds for Christmas. If you are going to drop a grand or two on Christmas this year for you and your entire family, it's a lot easier to figure out where to come up with the money for Christmas if you've been setting aside $100 or $200 a month throughout the year, than wondering where the money is going to come from five or six weeks out.
Christmas comes every year. It's not an emergency, so don't treat it as one. Plan for it through monthly budgeting.
The third thing you need to do is to setup a separate checking account with a bank that is not your primary bank.
Sure, such seems like a hassle, but ever since discovering that I am my own worst enemy when it comes to money, I've found another truth:
You need to hide money from yourself!
In realizing I am my own worst enemy, I've also discovered if I mix my Christmas money with the same bank account I use to pay the bills with, or my "rainy day" emergency funds account, I've discovered that I either don't have as much money going into Christmas as I thought I did, or after Christmas, I've discovered that I've spent more than I intended on spending, and now have less savings for other things that I was also saving for.
So the best solution I've discovered is to automatically hide my monthly Christmas savings in another checking account at another bank. That way I won't accidentally spend Christmas funds on other things, and likewise, I won't be able to easily spend more than what is in that account. When the funds in that account hit zero, Christmas shopping is officially over.
And since this Christmas account is at another bank, you don't have to worry about auto-drafting your account and taking money from other accounts you've already earmarked for other things. The only way to spend more money at this point would be to fall into the temptation of using another card, or you would have to add more funds into your already depleted Christmas account.
Of course, it is still possible to still fall into this temptation. However, I've discovered that by having a separate Christmas account, you provide a "check" to yourself that hopefully keeps your spending under control. If you over spend, your overspending will at least be slowed down by the slight trouble of having to get money from another account. You won't be able to spend money on other things without thinking about it first. You will be forced to recognize that you've reached your maximum spending budget.
And even if you do decide you can afford to spend more money on Christmas than you originally budgeted for in your Christmas account, at least you will be forced to account instead of just wondering where all the money went. Either way, this will help you keep your spending under control, and Christmas won't become an annual financial disaster.
Finally, this idea can be applied to multiple spending areas.
Don't just limit this idea to Christmas. Apply it to birthdays, vacations, or saving money for a car or a new house. Whatever your major financial goals are, I highly recommend opening an account for each one. And in doing such, I believe over time you will discover that you are better off financially than you were when you had all your eggs in one basket.
And while it might be a little too late to start saving for Christmas this year, if you start today, you can start to plan for Christmas next year. By removing the financial stress Christmas creates by simply budgeting every month and moving a little money into an account earmarked specifically for Christmas, just wait and see how much more enjoyment you will get out of the Christmas season when you know how it's all going to be paid for!
Ho, ho, ho. Merry Christmas!