Jumping off the Christmas Merry-Go-Round

Did you know Christmas happens to be on the same day every year? Really, it is! Who knew?

While the stores start reminding us in September Christmas is coming (isn’t that annoying?), many of us are caught by surprise when we flip the calendar to the month of December.

“What? Christmas is at the end of the month? Oh no, how we will pay for it?” So, we try to pay for Christmas out of the December paychecks. And when there isn’t enough money for Christmas AND the pesky December bills, out comes the credit card, because you can’t just skip Christmas, right? So, the next year is spent paying off the Christmas credit card charges, and the merry-go-round of debt spins round and round.

Let’s look at some numbers. In 2013, Americans planned to spend on average $800 on Christmas gifts. So just for fun let’s say Christmas is going to cost $900 once we add in decorations and extra food costs. If we put $900 on a credit card at 18% interest, we’ll need to pay $83 a month for the next 12 months to pay off Christmas. Our $900 Christmas just turned into a $996 Christmas.

Maybe that doesn’t sound too terribly bad. But what are the chances Christmas is the only thing on our credit card? Or that we’ll really make an $83 payment every month when the minimum is $25? So, let’s see what happens if we only pay the minimum $25 payment. Oh my goodness, it’s going to take 51 months at a total cost of $1275. Over four years to pay off one Christmas? An extra $375? There has to be a better way.

Yes, there is a better way! It’s called a sinking fund – a mini-savings account for a specific purpose. Decide in January how much you plan to spend on the next Christmas. Look at all your receipts (or your credit card bill) to figure out how much you just spent on the last Christmas as a basis. Take that total and divide by 12 months.

So if your Christmas budget is $900, you’ll need to set aside $75 a month in a Christmas sinking fund. Doesn’t sound too bad, does it? Imagine a stress free Christmas! Well, financially stress free anyway. There’s still finding the perfect gifts, endless parties, overeating, the in-laws, etc.

“But, Amy, look at your calendar, it’s October. What am I supposed to do about this Christmas?” Well, by my calculations, there are three months until Christmas. Setting aside $300 per month sounds better to me than trying to find $900 in one month.

Wait, what? You don’t have $300 to spare this month? Oh, I see. Ugh, I really hate to do this, I really do, especially since it so close to Christmas and we’re supposed to be nice at Christmas. But here’s the thing, it’s time for a little tough love…if you don’t have $300 to set aside this month, you can’t afford a $900 Christmas. There, I said it. Let it sink in for a moment.

The time is now to jump off the merry-go-round of Christmas debt. Yes, the jump is going to hurt a little (maybe even a lot), but it’s better to jump off now on your own terms than to wait until it’s spinning out of control and you’re flung off…into bankruptcy, no college fund for the kids, or no retirement fund or….

“But we have kids! We can’t skip Christmas! It will damage them!”

“But we don’t want anyone to know we’re having financial troubles. We have to keep up appearances.”

I hear you. I do. Our culture (and marketers) has built up the notion that you can’t have a Merry Christmas without lots of stuff – stuff that costs a lot of money. But hear are a few tips for cutting costs this Christmas…

• Be honest! Tell your family and friends a crazy lady with a personal finance blog told you to jump off a merry-go-round or you were headed for bankruptcy. (I’d suggest providing a little better explanation than that or better yet, just have them read the blog.) I bet you’ll be surprised how supportive they are. You may even give some of them the courage to jump off the merry-go-round too!

• Be creative! Instead of buying expensive gifts, make inexpensive gifts. Not crafty? Neither am I, but with Pinterest, there’s hope for us all! Or forget a physical gift, give gift certificates of your time – offer to do yard work, cook a nice dinner – the possibilities are endless.

• Be the parents! If your kids are old enough to have expectations – brand names, the latest trends, “but I got everything I wanted last year” – telling them the family needs to cut back this year so they can go to college, may not sit well. Kids tend to live in the here and now. But, news flash, you are the parents. You decide what is best, not them. Trust me, you will not damage them. I’m willing to bet you didn’t get near as much stuff when you were growing up and you turned out ok, right?

• Be blessed! Focus on the Reason for the season – hint it’s not Santa Claus.  Sing Christmas carols; attend church Christmas concerts; read Luke 2:1-20 (or listen to Peanuts’ Linus do the best reading ever); serve meals at a homeless shelter. The need for costly stuff will fade away when you see how truly blessed you are.

I pray you have a blessed, stress-free Christmas this year, whatever your budget may be.

If you need help jumping off the merry-go-round of debt, I’m ready to help. Contact me.

Got any other money saving tips for Christmas? Let’s here them! Do you already have a Christmas fund? Do you love it?