Start Your Christmas Gift Fund in October to Avoid Holiday Debt

October 3, 2007

Although we haven’t even seen Halloween yet, let alone Thanksgiving, it’s not too early to start budgeting for Christmas.

Make It Easier To Save
Are you paid twice a month?  Then you have 6 paydays between now and Christmas.  If your paycheck only comes once a month there are just three money days before the end of the year!

If you can save a portion of each paycheck between now and the end of December you’ll have built up a Christmas gift fund to pay for the load of presents you’ll shower on friends and family over the holidays.  It’s easier if you start saving small amounts early, rather than wait until the end of November and panicking about how much money you’re going to need; or worse just putting it all on your credit card and trying to pay it off in January.

How Much Should You Save?
The amount you spend on gifts is of course a personal choice.  One way to look at it could be to decide you’ll spend money on Christmas presents as a ratio of your disposable income. For example, if you have $500 left after expenses each pay period you could decide to set aside 30% of that for gifts.  The grand total that you’d save by the end of December would be your gift budget. 

The nice thing about this approach is that you have no reason to put it off.  Since you don’t have to figure out what you’re going to get each person and build a budget you’re less likely to procrastinate and delay your savings.  The other benefit is that it ties your spending to the amount you earn.

Another approach is to make a gift list of everything you’d like to buy, tally up the total, and set that as your Christmas budget.  Although saving as a percentage of your earnings is a simpler approach, itemizing your present wish list may be a little more realistic.  I imagine you’d tend to spend more overall with this approach but if you can identify the expenses in advance and save for them then that could be the better approach for you.

Avoid Holiday Debt
I can tell you right now some of the radio commercials you’ll hear come next January.  “Have a Holiday debt Hangover? Come down to XYZ Credit and consolidate your loans.”  They’ve got the ads lined up and ready to run.  Do you really want to have to go down to XYZ Credit and consolidate your loans next January? 

It will be the start to a new year, a time you can begin again fresh.  Why ruin it with a load of holiday debt?  Start planning now for your Christmas gift spending and you’ll be much happier in the new year, or at least less broke : )


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Ben Edwards, the founder of Money Smart Life, saved up enough to buy a Nintendo back when he was 12 years old. When he used the money to buy shares of Wal-Mart stock instead, he knew he wasn't like the other kids... His addiction to personal finance has paid off for his family and now he's helping you to afford the life that you want. Check him out on the web at Google Plus, Twitter and Facebook.

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7 Responses to Start Your Christmas Gift Fund in October to Avoid Holiday Debt

  • Home Finance Journal

    Great article, i’ve posted a more ‘updated’ version of similar tips on my site. You can view it here: How To Avoid Holiday Debt


  • The Financial Blogger

    I always prepare a list of potential gifts I could offer for Xmas in advance. Then, I have plenty of time to raise sufficient fund and also to find great deals.

    Shopping on Dec 23rd is a real pain as there are too many people and as you are spending without thinking.

  • Ben

    Good point Moneyning and Rod, you don’t have to wait until the last quarter of the year to start planning your holiday finances and bargain shopping. The sooner you start the better 🙂


    This is great useful advice and just in time for the holidays.

  • Rod

    My budget spreadsheet, in the Christmas/birthday category. Christmas amount is start in January, why wait. Take the amount you plan on using and divide by 12.
    If you went over the Christmas before. Don’t short change the next one by using it’s budgeted money to pay off the prier year. Don’t forget to adjust the coming year the changes.

  • MoneyNing

    Why not buy some before the holiday even starts? Just buy gifts when they are on sale instead of when you need them.


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