The Christmas season is one of my favorite times of the year. It’s a time to give thanks for all of our blessings, to enjoy time with family and friends, and to celebrate the birth of Jesus Christ. It’s a joyful time of year!
If you’re not careful, however, Christmas can end up being a disaster for your family financially. If you don’t plan ahead the season can end up leaving you with a mountain of Yuletide debt that you’ll paying until the next Christmas.
Today I thought I’d look at a few things to look out for this holiday season to ensure you don’t end up with a holiday financial disaster.
Here’s a recent Money Mastermind Show where we jumped into the topic of avoiding a holiday financial disaster.
Christmas, An Expensive Time Of Year
Christmas is easily one of the most happy times of the year, but if you’re not careful it can also be one of the most expensive. In fact, according to the American Research Group, Inc, families will spend an average of $861 for gifts in the 2014 holiday season.
Shoppers around the country say they are planning to spend an average of $861 for gifts this 2014 holiday season, up 8% from $801 last year according to the 30th annual survey on holiday spending from the American Research Group, Inc. (source)
When you break it down, the $861 dollar figure doesn’t even include other things that are common expenditures during the holiday season like travel, lodging and other expenses – which can easily add up to hundreds of dollars depending on your circumstances.
The point is, the holidays can quickly become a very expensive time of year, and if you’re planning on having any major expenditures, you should really plan ahead. When should the planning start? How about January of the previous year?
Set Up A Christmas Budget
The average family spends a lot on Christmas, so if you know you typically spend a lot on gifts, decorations, travel and so on, you should really be planning ahead for those expenses, and save money throughout the year for those costs so it doesn’t “surprise you” when December rolls around.
The problem is that most people don’t plan ahead and don’t save specifically for their Yuletide expenditures.
Only 13% of consumers actually save money throughout the year in anticipation of the holiday season (Time.com)
Only 13% of people are planning ahead for the holiday season and saving money for gifts, travel and so on. It’s no wonder so many people end up with large credit card hangovers in January!
So what can you do to ensure you don’t end up as one of those people with a huge credit card bill after Christmas?
Set Up A Christmas Budget
- Setup a firm gift giving budget for the year: Dave Ramsey has a fun budget creating tool at MyChristmasBudget.com. It asks you to make a list of names of people you need to buy gifts for this Christmas, asks you to give a dollar amount of a gift by each name, then it totals it up and tells you how much to save.
- How much should you spend? One rule of thumb is – don’t ever spend more than 1 week’s pay on Christmas gifts. (so for someone who makes 40k, that might be around $700.) For me, that should be the absolute maximum you ever spend, definitely don’t go over one week’s pay. At our house we typically spend much less than that.
- Make gift giving a regular part of your household budget: At our house we use the software You Need A Budget 4, which allowed us to do a search of the previous year’s gift giving expenses, set an approximate budget for the year, and then save small amounts every month towards that goal. So if our yearly gift giving budget was $1200 for birthdays, Christmas, etc, we would set it up to save $100 every month towards gift giving. Then when Christmas rolls around and we want to spend $600 on gifts we have the money available in our savings account.
As Dave Ramsey likes to say, Christmas is not an emergency, it happens every year. Don’t use this as an excuse to overspend and buy things you can’t afford. Save up and pay cash for all your holiday spending.
Do Your Best To Save On Christmas Spending
Even if you save up and pay cash for all of your Christmas gifts, it pays to do your due diligence and make sure you’re not overpaying for the things you buy. Here are some things to be aware of:
- Online shoppers tend to spend more: According to the American Research Group, “The planned use of the Internet to purchase gifts is at 54%, an all-time high for this survey. The average planned spending by those saying they will make purchases on the Internet is $942, 9% more than those who don’t shop online.” I’m not completely sure why online shoppers tend to spend more, except that maybe they’re shopping online more for the convenience, and aren’t as willing to look around as hard for a good deal. So the takeaway is be willing to shop around, find the best deal.
- Those who start shopping earlier tend to spend less: Waiting longer means you’ll spend more on your Christmas shopping because you’re rushed and you don’t shop around as much. For example, shoppers who had already started Christmas shopping in early November had an average spent of $666, while those who waited into December to do their shopping spent on average $1,051.
- Buy your gifts a year ahead of time: One of my favorite things to do when it comes to Christmas gifts is to buy them when they’re on 50-75% off on clearance in January, right after the Christmas holiday. Buy presents and save them for the following year! We have a shelf in our storage room where we can store gifts for the coming year – ones we find a good deal on!
- Re-gift! Another great way to save on Christmas spending is to re-gift things that you’ve been given in the past. For example, I often get books for Christmas. Often I’ll read those books, and then I’ll re-gift it the following year to another family member. Just make sure not to give it back to the same person who gave it to you!
- Give your time as a gift: If you’re giving a gift it doesn’t have to cost a lot of money. In the past when I’ve been short on money I’ve given my time and services to family and friends as a gift. One year I helped a family member who needed a website by building a site for them and hosting it on my server. Another year I agreed to give some “computer training” to an older member of the family.
Make Homemade And Creative Christmas Gifts
Another great way to save on Christmas spending is to try being more creative and frugal in your gift giving. Come up with some crafty ideas like:
- Put together themed gift baskets with inexpensive items: One year I gave a movie night gift basket with a recent movie, some movie candy, popcorn and a popcorn bucket. Relatively inexpensive and fun!
- Book and movie packs: Buy someone a movie, and the book the movie is based on!
- Home baked goods: Homemade bread, pastries, cookies and more are almost always appreciated.
- A memory jar: One family member one year asked people to contribute their favorite memory about one family member, and then put them all on pieces of paper in a “memory jar” that the giftee could then open and read.
- Handmake something: One year my wife made blankets for several family members. Relatively inexpensive, but people loved them!
The point is this – gifts don’t have to be expensive to be appreciated. They just have to be creative, from the heart or thoughtful in order to find a place in someone’s heart. Want a few more ideas to spark your creativity? Check out my post on 100 Frugal, Creative and Homemade Christmas Gifts.
Christmas, A Dangerous Time Of Year?
One thing people don’t often think about is that Christmas can often be a dangerous time of year as well.
Christmas Tree Fires
What’s one danger that often isn’t thought about? Christmas tree fires. While they aren’t super common, they’re often quite serious:
Each year Christmas trees start nearly 250 house fires causing an average of 16 deaths and $13.1 million in property damage. Although the number of fires started from Christmas trees is not extremely high, they are extremely serious. One of every 15 reported fires that began with a tree resulted in deaths.
So what can you do to avoid Christmas tree fires? Make sure your tree isn’t close to a heat source like a fireplace or heating vent. Keep the tree stand filled with water, and don’t leave it up more than 2-3 weeks, otherwise it may become too dry. Make sure to maintain your Christmas lights (look for frayed wires, etc), don’t overload your circuits and turn the lights off when away from home. Finally, don’t use open flames – like candles – near your tree.
Holiday Related Accidents
We’ve all seen National Lampoon’s Christmas Vacation with the image of Clark Griswold falling from his roof and hanging from the Christmas lights. This image isn’t just in the movies, however. Household accidents and ER visits tend to spike around the holidays. CPSC.gov estimates that there were about 15,000 holiday decorating related accidents and ER trips during the holiday season. Most common accidents include falls (34%), lacerations (11%) and back strains (10%).
So when you’re out decorating, make sure that you’re careful where you step, you have someone spot you on the ladder and that you wear gloves – and lift with your legs! Your health may depend on it!
Health Related Events
Christmas tree fires and accidents aren’t the only disasters that can happen on Christmas. Health related events don’t know what day it is, and things can easily happen on a day that often ends up being stressful for many. I have had family end up in the hospital on a holiday, so you should prepare all the year through for just such an eventuality.
- Have an emergency fund saved.
- Have insurance purchased for home, health, life, auto and so on to cover you in case something happens while you’re traveling or out and about this Christmas.
- Have an emergency evacuation plan in place in case the worst happens, like a tree fire.
- Plan ahead for emergencies of all kinds and then sit back and relax.
Remember The Reason For The Season.
Remember not to get too stressed out this Christmas season, after all it’s supposed to be a joyous time of year. It’s a time to celebrate the birth of our savior, a time to enjoy being with our families, and it’s a time to sit back and be thankful for all of the blessings that we’ve been given.
Don’t feel like you have to buy super expensive gifts. Remember, it’s not the gifts that are important at Christmas:
Don’t think the spirit of Christmas is about “stuff.” You can have a giving spirit without having a negative checking account. Don’t forget the reason for the season. – Dave Ramsey
Take some time out of the busyness to just reflect, to be thankful and to think back to the reason we celebrate.
Have your own tips and tricks to avoid a financial disaster this Christmas? Tell us in the comments!
I try to do all of my Christmas shopping as early as possible. I don’t have to deal with the craziness of the holiday shopping in stores and I get better deals at other times of the year.
Fig @ Figuring Money Out says
Christmas is a great time of year and it’s one that has so much meaning. It’s sad that it’s so dangerous for some people. Hopefully everyone can realize that the meaning isn’t in how much you spend but how much you care and the time you spend with people!
Mrs. Frugalwoods says
We had a pretty frugal, yet happy, Christmas this year. My husband and I didn’t exchange gifts with each other and we were able to use cash-back credit card points to purchase gifts for our families. Planning ahead, like you noted, is so important–it lets you identify your priorities and map our your spending in advance.
Bob Thibodeau says
Great article. Yes, planning ahead is the way to go! We planned our Christmas budget almost 10 months ago. Yes, we went over a little bit – but barely…and we had the cash on hand to do that, too!
Keep up the great content. You are a blessing to so many people and you don’t even know it!
Jason @ Phroogal says
I had a conversation with a reader who shared how this Christmas was rough and broke all sorts of records for busted water heater to car repairs to over spending. My answer simply was the need to have a budget. While he needed to borrow money to fix the water heater he also chose to spend more on gifts because of the stress of the holidays. My other suggestion was to shop before Halloween to avoid the shopping stress.