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.

Take the Deal, but Don’t Get Taken on Craigslist

Sometimes you need to sell things. Other times, you need to buy things. If you are trying to become Debt Free, you probably don’t want to pay full price, and you don’t want to pay Stupid Tax. Craigslist can be a great place to purchase items below the retail price, but there are some tips you want to keep in mind.

 

The Red Flags

There are sellers and resellers on Craigslist. Be sure you know which one you are dealing with online. A seller’s ad will usually have a detailed description and several close-up photos of the items. Additionally, you may see a local number or a typical email address. A reseller’s ad may have a vague description and a stock photo of the item. The phone number may have an out-of-town area code, an odd email address, or shady instructions for payment (PayPal Scam).

 

The Deal

• Be patient. If you are searching for the perfect item, it may take a little while to find it. Take your time. When I searched for the perfect bike, it took a while. When I searched for an elliptical machine, I found it quickly.
• Trust your instincts. If something on a posting seems odd, take note. It’s okay to call or email for information about the item. If something doesn’t seem right, pay attention to your gut and move on.
• Check reviews. If you see a good deal, follow up on the item, and then check out reviews on various sites. It is helpful to have the brand and model number of the item when you are doing your research to compare apples to apples.
• Compare prices. See if you are really getting a good deal by comparing the Craigslist price to prices on other sites such as Amazon, Overstock, Ebay, and other resale sites.
• Test the item. Try to stay local so that you can arrange to test the item. If you’re not an expert on the item, bring a friend who knows how to test it. When I purchased an iPhone on Craigslist, I took a techie with me who knew how to work the phone.
• Negotiate. Learn the difference between “Firm” vs. “OBO” and find out if they are selling other items that can be bundled.
• Pay with cash. Craigslist deals are usually final and cash brings quick closure. Besides, you don’t want your check account number or debit card number floating around.

The Scam

• “If it sounds too good to be true…” If you have heard the saying, then you have been warned.
• Don’t feel obligated to buy the item. Even if you communicate with the seller, research the item, and see the item in person, you shouldn’t feel compelled to purchase the item.
• Safety in numbers. Whenever you are meeting with a seller, always take a friend. There are cases of “robbery by appointment” across the country.
• Meet and exchange in public places. Coffee shops, bookstores, and police stations are very popular places to meet. If you are dealing with large sums of cash, a branch of your bank could also be an option. If you are dealing with Apple products, you could meet at an Apple store and have the Genius Bar run a check on the item.

Protect Yourself

• Cell Phone Numbers. You can use Google Voice to create a temporary number if you are uncomfortable using your own.
• Email Addresses. When I found a lost dog and attempted to find its owner, I created an email address specifically for that purpose on Craigslist. After weeks of no news, we shifted gears to find a home for the dog using the same email address on Craigslist. 

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.