It’s the Most Wonderful Time of the Year, Every Year, So Starting Saving NOW!

Every year, there are certain holidays and special occasions that may obligate us to spending our hard, earned cash for gifts, meals, and decorations – maybe even fireworks. These holidays and special occasions include:

• New Year’s
• Valentine’s Day
• Easter
• Mother’s and Father’s Day
• Independence Day
• Halloween and All Saints Day
• Thanksgiving’s Day
• Christmas
• Birthdays
• Graduations

Day in and day out, we may not give these holidays and special occasions a second thought until they creep into our lives again, or when we flip the calendar. One step towards financial wellness is planning for life’s moments in advance.

 

The Gift Budget

Similar to a Health Savings Plan or Flexible Spending Account, you should spread out funds for your gift purchases over the year. Plan how much you plan to give in gifts all year, and only spend that amount. Spending $764 at Christmas or $126.03 for your Sweetheart on Valentine’s Day will seem less burdensome when it’s split into 12 easy payments to yourself, not your credit card.

In addition, consider a new tradition at Christmas – The Secret Santa Exchange. You’ll only need to buy one gift (or two if your families celebrate separately) and you’ll help your entire family save on expenses. Before Halloween (two months in advance), gather the names of all the participants, draw a name out of the hat, and spend no more than $25 on that person. You can even split the exchange between adults and kids so you can pass along the tradition to them.

 

Potlucks

Most of these special days are celebrated around food. Rather than cater or individually hosting a meal, opt for a potluck.

If you do celebrate at a restaurant, consider going dutch at family gathering to help ease the expenses on the entire family. Just be sure to discuss it in advance so you can avoid that awkward moment when you start to explain your journey to financial wellness.

 

Clothing and Costumes

Some holidays prompt us to purchase special clothing that we may never wear again. Growing up, the family spent a pretty penny on Easter dresses and wedding party dresses. Instead, consider purchasing an outfit you can wear again.

 

On Easter, durable spring dresses and outfits can be purchased for children. If you are planning for or standing in a wedding, the bride could allow her bridesmaids to select their own dresses, as long as it matches the color palette. For Halloween, consider purchasing costume pieces from a thrift store or resale shop. If you have random items lying around, you could always make your own homemade Halloween costume.

 

Electricity and Other Utilities

Most people may not consider this cost part of the Gift Budget, but if you’re the type that likes to decorate at Christmas like The Griswolds, you should plan for this cost in advance. Take a look at your utility bills and determine what it cost you to decorate your home for Christmas, for Halloween Haunted House, or that monthly inflatable in the front lawn.

Additionally, if you host family at your home during the year, the electricity and water cost should be factored in as well.

It’s Not Me, It’s You: Breaking Up with Credit Cards

Breaking up with a loved one is hard to do. When you decide to call it quits with the credit card company, it might feel as though you are breaking up with a psycho. They will say anything and everything to win you back. At least, that’s what it felt like for my spouse and me. When we ended our relationship with credit cards, they attempted to invoke feelings of dependency, urgency, and even charity.

We closed four credit card accounts on the same day. Here is a summary of what happened:

Credit Card #1

This card was a bank issued credit card.

• Me: We would like to cancel our card.
• Them: We see that you have not used it in some time.
• Me: That’s correct. We’ve been using cash.
• Them: We can increase your credit line.
• Me. No thanks. I don’t see us using credit anymore.

This conversation lasted about ten minutes.

Credit Card #2 – Two Store Cards

We had two store cards from a major retailer. Since it was the weekend, we decided it would be interesting to see who reached a representative first. We called the number at the same time and waited. My spouse won and was the first to reach a representative.

• Spouse: I would like to cancel my card.
• Them: Are you sure?
• Spouse: Yes. I do not have any need for the card anymore.
• Them: You can use the card for your Christmas purchases later in the year.
• Spouse: That is okay. We saved cash for that.
• Them: You will not be able to donate to the school of your choice.
• Spouse: That is okay. That relative graduated from high school last year.

This conversation lasted about 10 minutes. By the time my spouse ended the call, I was still on hold. I hung up my call and began speaking to the representative on the other phone. Thus, this conversation repeated itself twice when I finally spoke to the same representative. Although my spouse had just cancelled their card, this representative was not convinced that I was ready to cancel mine and offered a store debit card. Oh boy…

Credit Card #3

This card was another bank issued card.

• Me: I would like to cancel my card.
• Them: How do you plan to pay for your purchases?
• Me: With cash.
• Them: How do you plan to rent a car?
• Me: With a debit card.
• Them: How do you plan to pay for airline tickets?
• Me: With a debit card.
• Them: Don’t you want the card in case of an emergency?
• Me: No. I saved up cash for that.
• Them: Okay, but we would really hate to see you go. Would you mind speaking with my supervisor about your account?
• Me: Sure, but I still want to close the account.
• Them: I understand. Would you mind holding?
• Me: No, that’s not a problem.

This conversation last for 20-25 minutes with the supervisor.

Before calling to close our accounts, we waited until we received a statement from each of the companies indicating that we had a zero balance. To celebrate, we had a plasectomy a few weeks later with our Financial Peace University students. We are fortunate that we inspired others to do the same.

Life Without Credit Cards

Now that we do not use credit cards, we have two separate checking accounts: 1) one for regular living expenses, and 2) one for items such as car rentals, online purchases, or any other expenses that may require a credit card number to be stored on file. For example, one healthcare provider required a credit card number on file in the event that the insurance company did not pay for the preventative procedure. Really? This gives a whole new meaning to blood money.

We were really tired of the dark side of credit cards. It has been liberating to know that when we make a purchase, we won’t have a bill in the mail a few weeks later.

Saving for a Rainy Day: Building Your Emergency Fund

Deciding to say, “No” to credit can mean that substantial changes must occur in your life. Your savings, spending, and shopping habits will need to be evaluated.

You should determine how much of a safety net you need for living expenses. My grandparents called this “The Rainy Day Fund.”

What do the experts say about the Emergency Fund? Let’s see what they recommend:

• Dave Ramsey: In Baby Step 1, Dave says should save $1,000 as quickly as you can. If you earn less than $20,000, shoot for saving $500. After you have paid off all of your debt, except the house, you should maintain an Emergency Fund of 3-6 months based on your living expenses.
• Suze Orman: In the past, Suze would encourage people to save six months of living expenses. Now, she recommends saving eight months of your living expenses.
• Gail Vaz-Oxlade: Gail encourages people to have an Emergency Fund amounting to six months of living expenses. If this seems overwhelming, she encourages saving $500 to start your Emergency Fund.

So one thing is clear, we need about six months of living expenses in our back pocket at all times. (On a serious note, keep your money in a savings account at a credit union or bank. I have had heartbreaking conversations with people whose relatives saved their money in places such as a mattress and had it stolen or lost it in a fire.)

This is why my spouse and I decided that we needed an Emergency Fund:

• We own (correction) owe on a home. Since we pay a mortgage each month, we are 100 percent responsible for everything that occurs on our property lot – like it or not.
• People, pets, and possessions will get sick. If we need to go to the doctor, take a pet to the vet, or take a vehicle to the mechanic, we don’t want that expense to come home with us.
• We need to protect our dependents: When you have children, move-in a relative, or adopt a pet, you have indirectly told them that they can trust you, and you are looking out for their best interest. Keeping your finances in check is part of that commitment.
• We needed protection in case of a lay off. My spouse had already survived two rounds of lay-offs. We wanted to make sure that we could weather the storm, if needed.

In the end, we have been able to build an Emergency Fund of three months. In order to do it, we worked on our budget, trimmed our expenses, and stopped borrowing. We aimed to keep our living expenses at 80 percent of our income or less. The next 10 percent of our income was dedicated to the Emergency Fund. Each time we got paid, we transferred funds. The last 10 percent went towards debt by paying the minimums. If we didn’t have enough for all of the creditors, we didn’t pay all of them. Those creditors below the line just had to wait, especially when we helped a relative purchase an inexpensive used vehicle with cash.

Sacrificing our time was the one step that helped us do this quickly. My spouse and I both taught in the evenings for nearly six months straight in early 2011. Generally, we worked from 8 a.m. to 10 p.m. most days of the week. It was a great way to pump up the Emergency Fund quickly, but seriously consider whether you have the time and the resources to take on two jobs temporarily. It is a rewarding, yet exhausting venture.