4 Minute Read
"There once was a man known as Christmas Chris.
He loved the Christmas season,
and giving was the number one reason.
But in the busy spending-madness of the holiday rush,
he got so caught up in giving he told his Christmas budget to hush.
It all began innocently enough.
One minute he was cross-checking online deals,
The next thing he knew, he was nipping at fellow shopper’s heels.
In the loudest toy store on Earth he ran in without a fright.
Clutching the last Hatchimal toy in a 100-mile radius for dear life.
'So what if it doesn’t fit in the budget?' he thought.
He could always count on American Excess to help him fudge it.
That is, until yet another gift 'emergency' came to derail his Christmas budget."
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The Cost of Christmas Credit
The latest National Retail Federation survey shows that holiday shoppers plan to spend $967 on everything from presents and pies to tinsel and trees this Christmas.(1) That’s all well and good when it’s a planned expense you can cash flow. But all that holly-jolly can do a lot of damage when you put the whole Christmas shebang on your credit card.
Let’s say you put $967 of gifts on a credit card, and it has an interest rate of 16%. You decide just to pay a minimum payment of $25 each month. It would take you over four years to pay off your balance! By the time it’s all said and done, your $967 worth of "stuff" would cost you a whopping $1,375 thanks to interest. That’s an extra $408 tacked onto your holiday bill for just one year of Christmas shopping! You can imagine how quickly the dollar signs stack up if you fund every single Christmas that way. Bah stinkin’ humbug, indeed!
How to Avoid the $400 Mistake
Can we all agree that going into debt is NOT the way to spend your hard-earned cash? So let’s dream a little.
What could you do with an extra $400 if it wasn’t being eaten up by credit card interest? You could use it to turbo-charge your vacation fund every year. Picture a relaxing week with your family on the beach—or maxing out on magic at Disney World—if you need a boost of motivation.
Here’s another idea: Pay your home off a little earlier with that $400! If you divide $400 by 12 months, that’s a little more than $30. Why not apply that extra $30 to your mortgage payment each month? You could shave almost $9,000 and over two years off your mortgage for a $150,000 home with a 30-year loan.
And of course, there’s always your nest egg. (Overachievers, take note!) Throw that cash into a Roth IRA and watch it grow to a whole new level. Consider the numbers: If you invested $400 a year in good growth stock mutual funds, you could pump an extra $20,000–30,000 into your retirement savings after 20 years!
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Make Next Christmas Even Better!
We’re not saying you shouldn’t buy Christmas gifts for the ones you love. Giving is the most fun you’ll have with money this season!
But if you can’t afford to buy Grandma a diamond bracelet this year—don’t! She’s had harder knocks in life (remember that whole reindeer incident?) and will still love you if all you can afford to give is your best batch of homemade cookies. And wouldn’t she rather see you build money-smart habits than a tacking on more debt for the future?
If you’re feeling regret for going overboard this Christmas, don’t worry. Just make the decision now that next year will be different. Avoid pinching pennies for Christmas 2018 by making a plan to cash flow next year’s holiday spending. Let’s say you want to budget $800 for next Christmas. Divide $800 by 10, then set aside $80 each month from January through October. Voila! You’re budgeting with the envelope system and didn’t even know it! You’ll have no need to swipe plastic when next November rolls around.
Don’t repeat the mistakes of Christmas past! Dave’s store has everything you need to get a head start on your 2018 budget before the new year even gets here. Grab one of his best-selling audiobooks or envelope systems to help make it easy!