If you are going to spend 5 months paying off your Christmas spending, it is better to do it before Christmas instead of after.

Eddard Stark Brace Yourselves Christmas Is Coming Game of Thrones Meme

Christmas Spending is Coming

According to a recent survey from the National Retail Federation, consumers will spend about $650 on gifts in the 2019 Holiday season. That includes gifts for family, friends, co-workers and everybody else.

As we approach the end of August, we are at a magical time! For most people there are 9 paydays between now and the end of the year. That’s one more in August, plus two in September, October, November, and December.

If you are one of those people, then you could set aside just $75 per paycheck for the rest of the year and have all of your Christmas giving paid for in advance. No credit cards needed!

Just like all savings goals: the longer you wait to start, the harder it gets.

Right now, if you set $75 aside from each paycheck, you will have $675 by the end of the year. But, if you wait just one more paycheck, then you will need to set aside almost $85 per paycheck to make your goal. And, if you wait until October, then you need to sock away almost $115 per paycheck to escape the holidays without adding to your credit card debt.

I don’t know about you, but I’d rather spend $75 per paycheck than $115.

Save Now, or Pay Your Credit Card until Spring

Just for fun, let’s say you are normal. Normal in the US means that you don’t save up for big expenses. Instead, you use your credit card and pay it off over time. So, instead of putting $75 per paycheck for four-and-a-half months toward Christmas, you put it all on your card. Then, on January first, you start the new year with $675 in new credit card debt.

According to CreditCards.com, the average interest rate on Credit Card debt is about 18% (published July 24, 2019). To keep the math simple, let’s round that up to an even 20%. If you put $75 per paycheck toward that card, then it will take you until the middle of May to pay off your Christmas debt. Plus, you will have added over $30 to the balance in interest.

Sure, $30 is not a massive amount of interest, but paying on Christmas until the middle of May does not sound appealing at all.

Why not start the new year with a clean slate!? You are going to have to pay for the Christmas giving at some point, so why not start now?!

Use Online High-Yield Savings Accounts

There are a lot of ways to get this done: One way that I like is to use an online, high-yield, savings account.

Personally, I use Ally.com, but there are lots of great options. At any given time, I usually have 2 or 3 savings accounts open at Ally. Their website allows you to give each account you have a nickname, and you can change the nickname anytime you want.

So, you can have a savings account for the Holidays, another for the down-payment for your next vehicle, another for a vacation that is coming up. Then, when the vacation is over, you can just rename that account and use it for the next big adventure.

Online savings accounts are currently paying around 2% (some a little more, some a little less). Using these accounts to save up for your Christmas shopping won’t make you rich on interest. But, it’s better than a stick in the eye!

Oh, and it is definitely better than paying interest later. But, you know that.

I hope this has been helpful! I welcome your comments with your thoughts and questions. And, don’t forget to subscribe to the newsletter to get notified whenever a new article is posted.

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