Saving up money for Christmas

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Christmas and the other winter gift-giving holidays aren’t that far away. You can either go into debt and start your new year off in worse financial shape than you’re in now, or you could save up some money now so you can pay for gifts without debt.

The solution may sound obvious: put away some money. But how to do that is not obvious to a lot of people. Some are really and truly short of cash. Others just haven’t been taught good savings habits. The good news is: to save up a small amount over a short time, you don’t need as many skills as it takes to save up, say, a mortgage down payment over a long time.

Saving money for the holidays

Let’s start with the easiest situation: someone who actually has disposable income – that is, people who can pay their monthly bills and still have money left over, as long as they don’t indulge in something very expensive or have an emergency to cover.

If you have disposable income and your problem is finding the discipline to save rather than spend, you have quite a few options. You may only need one of them, or you may choose to use a combination of them:

• Open up an online savings account with an option to set up a recurring transfer from your checking account. Set up a weekly or monthly transfer that comes out before you have a chance to spend everything.
• Stash some cash. Take out some cash periodically and stash it somewhere in your home where you won’t come across it and be tempted to spend it.
• Create another “bill.” When you’re doing your monthly bills, just create another one called “Holiday Fund” or whatever. Think of it like one more bill you have to pay a certain amount to each month, and pay it (by putting it in an online savings account or cash stash).
• Save your change. There are a couple of ways to go about this. (1) Always pay in whole dollars, and save all the change. Depending how many transactions you have in a month, you can come home with several dollars a day using this method, whenever you shop. (2) Always pay in $20 bills, and put the change in a special part of your wallet, and put that money away in a cash stash at home. Obviously, you don’t have to do this in every single instance, like when you’re buying a 50 cent item. You know your savings needs, and how close you are to meeting them. This is just another way to remind yourself to put money aside.

If you don’t have disposable income, let’s look at some ways to reduce your expenses temporarily. I’m going to ignore the obvious – everyone knows that Starbucks lattes and lunches at restaurants and manicures are expensive, and there are do it yourself options that will save you a brick. I hate it when financial advisors assume you’re indulging in stuff like that without a clue about the costs. Instead, I’ll offer some less obvious ones that not all of you will have thought of. (If you have thought of all these, no worries – in the next section, I’ll cover suggestions for very frugal people who are stretched really tight.)

• Temporarily suspend some paid subscriptions such as Netflix. Most services allow you a “suspension” option (designed for people who travel for months at a time) so you don’t have to cancel your account.
• Temporarily reduce or suspend your cable/internet/phone package. This can be tricky – some services charge cancellation fees, so make sure you’re not giving up anything you can’t get back in a few months once the Christmas gifts are paid for. But if you can do without cable for three months, or drop your land line, or cope with a slower internet speed (maybe this will finally push you to go sit in coffee shops with wifi and write that novel you’ve dreamed of for years), it’s a great way to save a good little chunk of money over a few months.

And what about selling stuff? You could have a garage sale, or put some items for sale on Ebay or Craigslist or through the local paper, or sell some DVDs you’ve tired of to a shop that re-sells them (if you shop on sale for DVDs, you may get back nearly what you paid for them). If you’ve got some nice items you just don’t really use anymore, turn them into cash!

For those of you who really don’t have any money to spare and are already being as frugal as you possibly can, I haven’t forgotten you. Your situation is obviously a lot more limited than some of the others, but there are still options:

• Pool with loved ones to buy the expensive presents. Let’s say the kids want a game console you can’t afford, and they’ve been really good all year and they deserve a nice present. Ask your relatives if, instead of everyone getting the kids small affordable gifts, you could all put something into a pool from which you’ll buy the kids that one big gift.
• Forget the Christmas cards. Cards are getting pricey, and postage is, too. You can save considerably by sending everyone free electronic greeting cards. In the case of less email-savvy folks, be sure to follow it up with a phone call to make sure they got it. If you don’t want to tell them you’re saving money (some people just don’t understand), just tell them you’re being more environmentally friendly with the e-cards.
• Send the kids’ Christmas list to relatives. Most relatives want to buy kids stuff they like, but just don’t know what the kids are into – hence the socks and sweaters and so on. Tell the people who normally buy for your kids several items on the kids’ lists, and get them to commit to something – kind of like a bridal registry. This is a great way to spread out the expense of the kids’ gifts among people who were going to spend money anyway, without you having to spend as much as usual.
• Only gift kids. The big gifting holidays are really mainly about kids, and for their benefit. Let the adults in your life know you won’t be doing gift exchanges this year because times are tight – if you’re worried about looking like a cheapskate, let them know you don’t expect anything from them either. If you feel there are a few adults you have to gift, check out thrift stores and garage sales for like-new items.

Got any other suggestions for saving up for the holidays?