You know what they say: Nothing is certain in life except for death, taxes … and the pressure to overspend during the holidays.
Oh, wait. That’s not how the maxim goes—although maybe it should.
Because, sure enough, the season of financial temptations is right around the corner, which means it’s prime time to figure out whether your budget is prepped to weather the upcoming spending storm.
Now, don’t go into a panic—there’s a simple strategy you can adopt now to help you sidestep those common holiday budgeting bombs, whether it’s the last-minute invite to your co-worker’s white elephant gift exchange, the year-end tip to your dog walker or a particularly pricey plane ticket home.
The key is to think about holiday spending the same way you would other recurring, non-monthly expenses, like annual insurance premiums, quarterly tax estimates and home maintenance, says Tom Gilmour, a CFP® at LearnVest Planning Services. “Since you know you’re going to have the expense, being ready is just a matter of planning for it far enough in advance,” he says.
Enter the holiday savings account.
Just as you can factor those other non-monthly expenses into your budget by funneling a portion of each paycheck into a separate savings account to cover them, you can do the same thing for your holiday spending by opening up an online high-yield account earmarked for the season’s expenses, says Gilmour.
Ideally, you’d have defined your holiday spending cap and created the account in January, which would leave you plenty of time to save up cash. For example, if your target goal is $1,200, then squirreling away just $100 a month over the year makes getting to that number a lot easier.
But all hope isn’t lost if you haven’t already done that. Just like it’s never too late to start saving for your retirement, setting up this account now—even with only five weeks to go—is still a wise thing to do. Socking away as little as $20 a week until Christmas can yield enough to cover the cost of a rental car or groceries for a family dinner with all the trimmings.
So now that you know this simple hack for holiday savings, what else can you do to fund your account—now and next year—to help ensure that both December 2014 and 2015 are filled with good cheer? We asked Gilmour, plus other CFPs around the country, to share their favorite tips for boosting your holiday savings balance.