September 6, 2022
Most people look forward to the holiday season each year. While the holidays might allow you to build memories with your family and friends and partake in the spirit of giving, it is also important for you to carefully plan so that you won't overspend and continue paying on your purchases for a year or more.
Fortunately, there are some smart steps you can take to avoid going into debt during the holidays. Here are five tips to save for the holidays so that you can enjoy a stress-free experience without breaking the bank.
1. Make a List and Check it Twice
The first step you should take is to make a list of the people for whom you need to purchase gifts and other items you will need during the holiday season. Your list should go beyond gifts and include items such as food and holiday decor. Once you have a list of people, food items, and decorations, it can help you to understand how to plan accordingly. Starting early can give you plenty of time to save so that you will be ready when the time comes.
2. Create Your Budget
Creating a budget that takes into account the upcoming holidays is a critical step. If you don't have an idea of how much money you have available to spend, you will likely go over your budget and into debt. If you go into debt during the holidays, the aftermath of the season can be sobering and painful.
Take a careful look at your current savings and budget, taking into account your monthly bills and income. Track your spending for a month, and categorize your expenditures. Doing this can help you identify areas in which you can make cuts. You can then identify how much you can afford to set aside to earmark for holiday savings and gift purchases.
Review your list of people for whom you intend to buy gifts, food and your holiday decor. You can then assign a budget to each listed item or gift. If you don't have enough money to cover everything and everyone on your list, you might cut back on some of your expenses to accomplish your savings goals or pick up a side gig for a couple of months to help devote more to savings.
3. Be Strategic About Your Gift Purchases
Once you have a list of people for whom you want to buy gifts and an idea of your holiday budget and savings goal, you should then determine which gifts you want to purchase for each person on your list. Making a list of gifts several months in advance can provide you with a means to be strategic about savings and when to make purchases.
Many people like to make all of their purchases on Black Friday or Cyber Monday. However, shopping these days might not allow you to get the best deals despite the hype. For some types of gifts, such as outerwear or toys, you might get better prices if you wait to shop until December. In other cases, you might find great deals by shopping ahead of the season when things go on sale.
You can look through gift guides or write down gifts that you think a specific person on your list would love when you think about them and what they enjoy doing. Once you have a list of gifts, you can then start pricing them so that you can plan.
4. Wait to Purchase Items for Yourself
Many people decide to purchase items for themselves during the holidays. While you can include self-purchases in your budget, it might make more sense to wait to buy the items until after the holidays. Once the holidays are over, you might then be able to take advantage of steep discounts and post-holiday sales as retailers try to clear their holiday inventory.
5. Participate in the Christmas Club
A great way to ensure you won't have to go into debt during the holidays is to open a Christmas Club account with La Capitol Federal Credit Union. With this type of account, you can make regular direct deposits. When Nov. 1 arrives, the money in your Christmas Club account will transfer into your regular savings account automatically so that you can shop for holiday gifts.
You can open a Christmas Club account for just $25.* When you have a minimum of $100 in your account, you can start earning dividends and avoid service fees. You will earn interest on your balance at an APY of 0.10%,* which can help add to your savings. The dividends you can earn will be compounded monthly.*
Some people choose to make purchases for the holidays using a buy now/pay later plan through a retailer. While this option is popular, there are some reasons why it might not be the best choice. A buy now/pay later plan divides the total purchase over several installments. However, you might have to pay a higher rate of interest over the life of your installment plan. Buy now/pay later plans might also encourage you to purchase more than you can afford and could also involve a hard credit check. Opening a Christmas Club account and making deposits in advance for the things you want to buy can help to avoid these issues while also allowing you to earn interest rather than paying interest on the purchases you make.
Planning for the holidays can help you to avoid going into debt while enhancing your ability to enjoy a stress-free season with your family and friends. To learn more about saving for the holidays, talk to the financial professionals at La Capitol Federal Credit Union today.
*La Cap Savings (Share) Accounts are variable rate accounts. La Cap may change the dividend rate for your account as determined by the credit union Board of Directors. Dividends earned are posted and compounded monthly. Each day your account balance exceeds $100.00, you earn dividends on the entire balance. Applicable fees and conditions could reduce the earnings on your account.
Christmas Club: Minimum balance to open - $25.00. Beginning 90 days after account opening, a low balance fee will be assessed each month that the account has a balance of less than $100. You must maintain a minimum daily balance of $100.00 in your account each day to obtain the disclosed annual percentage yield. You may make unlimited additions into your account. You may not make any withdrawals or transfers to another credit union account of yours or to a third party by means of a preauthorized or automatic transfer, telephonic order or instruction, or similar order to a third party. If any withdrawals are made from this account before the end of the club term, then this account may be closed. If a Christmas Club Savings account is closed before the end of the club term, it cannot be reopened until January 1st of the following year. An early withdrawal fee of $25.00 will be charged for each withdrawal before the end of the club term. Any funds in the account will transfer to the primary share account on November 1st of each year, regardless of account opening date.