Will you be splurging a little or a little too much for the Holidays? Do you plan to set a spending limit this year, and if so, how confident are you that won’t spend above it? In the coming weeks, the news will be filled with statistics about whether holiday spending is up or down this year and how retailers are reacting. But for most of us, the important news is what our credit card statements and bank accounts will look like in January (and beyond). Financial experts suggest holiday shopping expenses should not exceed 1.5% of a person’s total income. So if my annual income is $36,000, I should limit my holiday spending to $540.00. How does this compare to your plans? If this amount seems reasonable for your holiday needs, you’ll be glad to know that the weekly deposit to save this amount is also 1.5% of income.
Annual salary = $36,000
Weekly salary = $36,000 / 52 weeks = $692.31
Weekly account deposit = $692.31 x 1.5% = $10.38
Amount available for holiday spending = $540.00
Setting aside $10.38 each week to have what we need for the holidays sounds like an easy plan and it used to be very popular. Have you ever heard of the “Christmas Club Account”? Many people used them in the 1970s and I was surprised to find that they still exist at many local banks and about 72% of credit unions (many under different names like “Holiday Helper Account”). The account is typically opened in January, and deposits are made throughout the year to set aside money specifically for the holidays. The accounts were designed to help people to save small amounts each week throughout the year and eliminate financial stress around the holidays.
Saving $10.38 each week is possible for most of us and having $540.00 available for the holidays would be great, but couldn’t we simply deposit $10 or even $15 each week into our savings account during the year? Sure, but would we do it reliably, and wouldn’t it blend in with our other finances and get lost in the shuffle (and not be there when the holidays rolled around)? I think that segregating the savings from our regular finances keeps it out of sight and out of mind, especially if we use direct deposit or an automatic transfer to make the deposits.
If your holiday plans require more than $540.00, then saving a bit more each week can make up the difference. The table below shows the available amount for holiday spending based on 52 weekly saving deposits.
Keeping it simple and preparing for future expenses can go a long way toward eliminating debt, and reducing stress in the process.