Splurge a little for the Holidays?

Did you splurge a little too much for the Holidays? Did you set a limit this year, and if so, did you spend above it? In the coming weeks, the news will be filled with statistics about whether holiday spending was up or down this year and how retailers were affected. But for us, the important news is what our credit card statements and bank accounts will look like in January (and beyond). According to wiseGEEK.org, financial experts suggest holiday shopping expenses should not exceed 1.5% of a person’s total income. So if my annual income is $45,000, I should limit my holiday spending to $675.00. 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 = $45,000

Weekly Salary = $45,000 / 52 weeks = $865.38

Weekly account deposit = $865.38 x 1.5% = $12.98

Setting aside $12.98 each week to have what we need for the holidays sounds like an easy plan to follow and it used to be very popular. You may not have heard of a “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 (see the note at the bottom), and deposits are made throughout the year to set aside money specifically for the holidays. The accounts were designed to help people to save a little each week during the year and eliminate financial stress around the holidays.

Couldn’t we simply deposit $5 or $10 a 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 transfer funds or to make the deposits.

How did you handle holiday finances and setting shopping limits this year?

Note: I found a “Christmas Club” account at Citizens First Bank that accepts deposits from November to the following October. It pays 2.25% on balances up to $1,250.00 as of this writing and a check is issued to you around October 15th.

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