In the January 27th issue of The Voice, someone wrote to Dear Barb, explaining how they went way over budget this past Christmas and woke up after Boxing Day to a surprise bill. While I’ve been just as guilty as the next person, I’m going to be a bit of a stinker and say that if you celebrate Christmas, your wallet should be prepared for it, just like you prepare the turkey and stuffing, don’t you think? Christmas does come around every year—on December 25th—like clockwork. It’s not like it takes us by surprise. Neither do birthdays, anniversaries, and all other annual celebrations.
All kidding aside, Barb gave some amazing advice to a surprisingly common problem. So common, in fact, that multiple posts and articles are written about how to tackle this North American pestilence every year. I was floored after reading multiple Facebook threads about how people spend thousands every year, just to please two or three children and four in-laws. I accept this; to each, their own after all.
What baffles me, however, is that these thousands are spent by people trying to climb out of the hole they dug themselves into, while simultaneously feigning surprise and claiming they weren’t prepared for Christmas expenses, that it caught them off guard! All my imagination can muster up when hearing this is the Terry Crews look. We are now far enough past Christmas to have come to our senses; we also have 10 months ahead of us to prepare for the next holiday season, just by having a little foresight and stop playing dumb.
The Damage is Done.
Barb suggested we prioritize our debt and work on the highest interest rate first. While this is sage, mathematical advice I disagree with this. Although most financial advisors will give similar advice, from a common sense point of view, debt has nothing to do with math and everything to do with mentality and the psyche. If we have an extra $50 lying around and throw it at a $500 credit card debt, we will get a better sense of accomplishment than putting that fifty-dollar-bill towards a $50,000 debt, no matter the interest rate. It’s a psychological boost. We see the numbers change more drastically on the smaller balance, which makes us try harder to find another $10, $20, or $50 to put towards our debt load. Next thing you know, your car is paid off four years earlier than expected!
This is called the Snowball Method and it tackles debts according to their balance, starting with the lowest one first. The reason it’s so popular with those carrying a heavier debt load is because seeing the avalanche is overwhelming at best, whereas seeing a small victory, even if miniscule, helps us keep marching on.
Eat the elephant one bite at a time. Next, Barb suggested we put aside a little bit each month—or pay period—to prepare for next Christmas. I 100% agree here and can’t preach this loud enough! It doesn’t have to be a substantial amount, but you should estimate how much you intend to spend on holiday gifts or birthday parties and set a budget for them. I also know it’s tempting to go overboard with spoiling your loved ones. Every little trinket on their wish list, however, will only put a temporary smile on their faces, it will not truly fill their hearts. That’s only something you can do—with your presence, laughter, and the memories you create with those you love.
Once you set a reasonable budget for these occasions, you need to be strict about sticking to it. No last-minute stocking stuffers or birthday surprises; only spend the cash you set aside. Besides, if they love you more than your wallet, I doubt they want you to go broke. Once your budget for each occasion has been set in stone, divide that amount by how much time you have left. For example, we still have ten months until the next holiday season. Putting $100 aside each month into the cookie jar isn’t so bad now compared to dishing out $1,000 next January. However, you have to diligently feed that jar every month. If you skip a couple months, to cover a few other items, this won’t work very well—trust me, I know. If you do stick to the plan, though, you’ll be pleasantly surprised come Boxing Day when you find yourself out.. $0, zilch, nada. My heart skips a beat just thinking about it!
Finally, a word of caution: under no circumstance are you to whip out that credit card (or any other means of payment) under the pretence that you’ve been diligently feeding the ‘gift fund’ every month and you aren’t under budget for once in your life. Just like wearing over mitts to keep from scratching your face off when you get the chicken pox, do what you need to do and hide, freeze, burn, or shred those credit cards if you have to. Stick to your original plan, write out your gift list just like you do your grocery list, and even do some market research to find the best prices out there. Spend only what you have actually set aside and next January 1st you’ll be toasting to the new, debt-free year ahead and thinking “maybe that cheapskate made a valid point after all.”