You might be a bit confused about the timing of this post since Christmas was just a few weeks ago. But, it is important to start thinking ahead to Christmas 2013 now in January. I’m not talking about making a list of things you want, but rather how you can prepare yourself financially for Christmas.

If you are like others, you might have gone into debt over the holidays. It’s a vicious cycle where come January, we have high credit card bills. We resolve to pay off our debt in the new year, and many of us are successful at it. But come December, we start buying gifts and wouldn’t you know it, we find ourselves right back in debt again. The key to avoid this cycle is to plan now, to save for Christmas now!

How To Save For Christmas In January

To make this work, look back at how much money you spent over the holidays. For argument, let’s say it was $1,000. Now, think about this amount a little bit. Would you have liked to have spent less on gifts or more? Maybe you are comfortable with this amount.

Whatever the amount is, take it and divide by 11. So, if we used the above $1,000 we divide by 11 to get roughly $91. This is how much money we need to save each month so that we have $1,000 come Christmas.

We use 11 instead of 12 because we will need the money come December. There is no point in budgeting for money through the end of December when we need the money at the beginning of December. If we were to divide by 12, we would come up short. While the amount would not be very significant, roughly $85, it is still a shortfall. This shortfall is then an opportunity for you to pull out your credit card and that is a slippery slope and something we want to avoid at all costs.

If you get paid bi-weekly, you can simply take your goal amount ($1,000) and divide by 24. This gets us to roughly $41.50. This is the amount we would have to save each paycheck in order to save for Christmas. You can then set up a an automatic transfer from your checking account to your special savings account each time you get paid so that the money goes right into your Christmas Fund. This will ensure that you will have enough money come Christmas. Again, we are dividing by a number so that we have enough money for gifts come December, not the end of the year.

The second step in this process is to open a savings account dedicated for Christmas. Unless you are really careful (and if you are in debt from the holidays you aren’t) you can just lump the money you save for Christmas in with your regular savings. The reason I frown upon this for almost everyone is because without a separate goal fund, you are going to lose track of what money is for what purpose. Come June you might look at your savings account and see a lot of money in there and use it for a vacation. Then come December, you don’t have enough money for Christmas. Create a separate account so that you are not tempted to use the money for other reasons or lose track of it.

Final Thots

It really is this easy. I encourage you to open a separate savings account and begin save for Christmas now so that you can avoid the cycle of getting into debt. By saving money throughout the year you have the benefit of your money working for you all year long (earning interest). Then come January of next year, you don’t have to worry about paying credit card debt off. You can focus your attention on other financial goals.

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Jon Dulin

Hi, my name is Jon and I run Penny Thots. I blog about many personal finance topics, but my specialties lie in investing, paying off debt and career goals. I also blog at Money Smart Guides.

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