No Holiday Savings Yet? Here’s How to Build Your Funds Fast

Timing is everything when it comes to saving for the holidays. The longer you have to build up cash reserves, plan your budget and buy gifts at the right price, the better you can cover these seasonal costs without going into debt.

Avoiding debt around the holidays can save you from a spending hangover in the new year: Shoppers who used credit cards to fund the holidays in 2018 anticipated it would take them over three months to pay off their debt, according to a NerdWallet survey of over 2,000 adults conducted by The Harris Poll.

Starting a couple of months before peak holiday season might be cutting it a little close for grand savings schemes this year, but you do have options. Here’s how you can plan your spending this year — and start saving for next year’s holidays.

Set your plan for this year

Say you’re planning to kick off shopping in earnest around Black Friday, which falls on Nov. 29 this year. You still have two months for saving and planning. Start with these steps:

Set your holiday budget

If you don’t have much savings, you’ll likely have to use your discretionary income — what’s left over after regular bills — to fund your holidays. Get a solid understanding of how much that is and try to keep expenses, including gifts and food, within that amount.

Being mindful of what you can afford can keep you from overspending, says Los Angeles-based financial coach Dominique’ Reese.

“I say think about your future self,” Reese says. “How would your future financial self — yourself in January, February, March — feel about the expenses that you made over the holidays?”

To build your holiday budget, trim discretionary expenses over the next couple of months. Cut back on dining out or going to the movies, or temporarily cancel a couple of monthly subscription services.

Spend smart

Create a gift list that fits your budget, find good deals, and consider reducing holiday spending on food and gifts across the board to avoid going into debt.

Use your budget to guide your gift list. If your budget is tight, consider whether you can buy for fewer people; maybe you can suggest a get-together instead of a gift exchange with some friends.

Black Friday and Cyber Monday can offer big savings, but you might find better deals at other times. Start checking prices now so you know what’s a good deal — and what to skip.

Being frugal with holiday meal shopping can go far, says Summer Red, professional development manager at the Association for Financial Counseling & Planning Education.

“Food is central to most holiday celebrations, and there are a lot of foods people will buy even though people don’t like it,” Red says. If no one in your family likes the dark meat of a turkey, for example, consider getting specific cuts rather than a whole bird.

“I encourage people to let go of some traditions and focus on what they really enjoy,” she says. “That means you also have less food waste and less money waste.”

Set yourself up for next year

While planning this year’s holidays, start thinking about how you’ll save money next year.

Track your spending to help inform what you’ll need, Reese advises. “If you went over your budget, set aside more for next year,” she says.

Then, find a saving strategy that works for you. Here are a few options:

The 52-week savings challenge: One of Red’s preferred methods, with this “challenge,” you start by saving $1 the first week of December, then $2 the next week, $3 the following week, and so on, adding one dollar each week for a year. At the end, you’ll have nearly $1,400 to spend for the holidays.
Holiday savings accounts: Typically offered by credit unions, these savings accounts are generally locked so you can’t access what you’re putting into savings until the holiday season. Putting just $25 a month into one of these gives you $300 saved for the holidays after a year.
Set aside part of your income: Reese suggests socking away a percentage of your income and automating transfers to build the habit of saving. Having some of your paycheck deposited directly into a savings account by your employer is an easy way to set money aside without thinking about it, too.