The holidays and end-of-year time can bring about big changes in your monthly cash flow. And this can go both ways (sometimes one right after the other).
You might be going along — spring, summer, then fall — with a budget and cash flow that work well for you. Sure, there are a few snags here or there, a few ups and downs. But things are pretty predictable.
Then the end of the year creeps up, and suddenly there's:
- Extra spending on travel to see family
- Extra spending on gifts and social events
- Surplus cash flow from bonuses you earned that are being paid out
- Surplus cash flow from holiday gifts
- Pumpkin cheesecake, egg nog, and decorated trees your cats like to climb (oh, I think I'm talking about myself here…)
It's kind of bi-polar sometimes.
Hosting a Christmas party. Deficit. Parents slip me $50 for the holiday. Surplus. Get volun-told to cover something for your kid's school holiday party. Back in the red. Rinse and repeat.
So what are some ways to deal with these big changes in your cash flow this time of year? I've got a few strategies for you.
Proportion Out Surpluses Ahead of Time
You might not know if you are getting a bonus, a cash/gift card gift, or any sort of surplus at the end of the year. But it's a good idea (and kinda fun) to figure out how you'd dole it out in case you do.
Here's what to do:
- Remember that a portion of it may go to taxes (particularly if it's a work bonus), and that those taxes may or may not have been taken out prior to you receiving the money.
- Identify a percentage that you are going to lop into savings, right from the start. Start at 50%, sit with that number, and then ease it up until you feel too much like Scroodge. Make sure the percentage/number you end up with is a stretch outside of your comfort zone.
- Identify any spending needs in your life that the rest of the money could go for. How could it be used to get the most satisfaction + needs met for you and your family?
Make Monthly Cash Flow + Budgets a Bit More Fluid
At the holiday season — barring going into debt — it can pay big time to be a little more fluid in your monthly budgets. If November bleeds into December's budget for groceries, it's okay. Spend a little less on groceries in December to make up for it.
You can also be more fluid from week-to-week. I carry surpluses and deficits over from week to week, so if I spend $20 less one week than my Mad Money spending allows, then I have $20 more to spend the following week. If I want to make a big purchase without raiding the savings account, then I purposely set aside money each week to “save” up for it. So if I have a large purchase of, say, $100, I might set aside $25 each week for the month to spend it all on one thing.
It's the same concept when eating in moderation. Getting ready for the big Thanksgiving meal, you might skip on lunch or breakfast. Or perhaps the next morning you're still feeling slightly like a blimp in the Macy's Day Parade, so you decide to sit this one out.
Borrow from Categories for Extra Spending Elsewhere
Especially with the holidays approaching, you're probably already borrowing from Peter (aka, the grocery budget) to pay Paul (aka, the kid-needs-shoes budget) and then some between gift-buying, social events, and getting ready.
It's a great strategy, and keeps your total monthly spending within your total spending category limits anyway. I'd like to add a few tips to squeeze a few more bucks out for you:
- If you have lots of social events around the holidays you'll be going to (with food), then purchase less that grocery store trip to uncover some cash for other things.
- Travelling for the holidays? Put your water heater on “vacation” mode, and turn your thermostats way down/up to save some money there. Leading up to the trip, do an “eat-from-your-cupboards” challenge instead of buying groceries for that week and being tempted to overbuy. Your bell peppers and milk will probably not get fully used before you leave anyway.
- Shift any purchases you can until the after-holiday clearance frenzy.
How to Set Yourself Up for a More Even-Flowed Holiday Season Next Year
So, you're here, and it is what it is. While this year you might only be able to band-aid the issue, I'd like to show you how to set yourself up for a financially blissful + less stressful holiday season next year.
- Do the Retirement Savings Shuffle: Max out retirement savings in 10 or 11 months instead of 12. Two months without contributing to retirement will definitely give you breathing room (hint: don't forget to turn automatic retirement savings back on in January. No cheating!).
- Open A “Holidays Rock” Savings Account: Designate a savings account for the Holidays/End of Year, and drip feed it $30-$50 per month throughout the year.
- Introduce New (ahem, more realistic) Gift-Giving Traditions: At the end of this holiday season, or perhaps in the Fall of next year, talk to your family and friends about new gift-giving traditions that will be easier on everyone's wallets. For example, the adults in the family could exchange names and only buy one gift at an agreed-upon limit instead of everyone buying everyone a gift. You could have a “Buy Nothing” Christmas where everyone exchanges homemade gifts, or take a thrift store challenge where you and your friends hunt for the best gift possible under $10 (this one is pretty fun!). You could do a white elephant gift exchange at the holiday party. There's lots of options here.
- Start Your Holiday Shopping WAY Early: I love this one. In our home I have a designated gift cabinet. Throughout the year as I happen upon the perfect gifts for specific people (normally during sales and clearances), I purchase from that month's/week's mad money spending and stash it away. Talk about taking the pressure off in the last few months of the year! Confession: I start doing this in the clearance frenzy of the previous post-holiday season.
What are your financial holiday strategies? Please share in the comments below!