Christmas in July

Do you know who you are sending Christmas cards to this year, where you are celebrating the holidays or what your budget will be? You may be reading this and thinking, “No no no! It is way too early to be discussing a holiday budget.” However, this is just the time to start planning for all of your holiday expenses.

 Lee Hyder is a financial wealth coach. As the founder of Lee Hyder and Associates, he has helped people in the Akron area make a plan for all kinds of events in their lives. He says that education is the key to success for his clients. “We start our relationship off with an educational program, teaching people all about money investments, the market, emotions,” says Hyder. Talking about your emotions may seem like a stretch when it comes to managing your money, but Hyder says that emotional spending can be a challenge during the holiday season.

“People always get in trouble at Christmas,” says Hyder. “The biggest problem that people have when it comes to the holidays is that they really don’t have a plan. Without a plan, they’re 100 percent going to make their Christmas decisions on emotion. You get that unexpected gift from somebody that you haven’t even thought about and now, emotionally, you feel obligated to step up and respond.”

This obligation to match gifts can be a big problem and can derail your financial plan. To stay on track, Hyder has several tips he suggests people follow for their holiday financial plan.

Make a list and check it twice

First they make a few lists. “I encourage my clients to make two lists. First would be a Christmas card list.” This list is for those friends and family that you plan to send a Christmas card to. These are mainly the people that you want to reach out to over the holiday season, but aren’t close enough to give a gift to. The second list is the gift list. “The people on the gift list will also be on the card list, but these are the people we’ve made a mental commitment that the relationship, for one reason or another, is worthy of a gift,” says Hyder. 

Deck the halls, on a budget

Next, it’s time to set up a budget. Hyder says it is important to make a mental commitment that you will stick within the budget. Once you are looking at your budget, think about how much you want to spend on each of your loved ones. “We need to determine, ‘Is my gift list for everybody from a spouse to my grandchildren $1,000, $1,500 or $500?’”

Do you try to spend the exact same amount on each child, sibling, cousin or parent in your family? In the pursuit of fairness, many people like to set a particular amount aside for groupings of loved ones. Hyder encourages this. “What I’m going to do is take my gift list and create people who are going to receive a gift and break it down to A, B and C people.” These three tiers allow you to separate the people on your gift list by price of the gift you plan to give them.

After dividing up your list into A, B and C people, determine just how much to spend. “I’m going take the total amount of my budgetary gifts and divide it by the number of people that are on my gift list. Then I will come up with an average number per person, if I did an equal distribution. We all know that not everyone on your list is necessarily in your mind an A, but you want to do something for them,” says Hyder.

The Christmas club

Once you have a budget established and your list is split into groups, it is time to think about how you plan to save for all of this spending. Hyder recommends placing your money in a specific place. Instead of just putting all of your spending on a credit card and planning to pay it off when it comes, slowly save for the excess spending. “So if I decide to spend $1,200 for Christmas, I’m going to open up a new account and I’m going to very consciously put $100 in that account a month.”

A Christmas club account doesn’t need to be exclusive to the holidays. Instead it is just a specific account where you set aside your money for a tailored purpose. “It could be a vacation club and you’re just putting money in it when you get you’re statement from the bank. You can instruct the bank to register that account any way you want,” says Hyder. The important part is that you are intentionally planning for future spending.

Planning ahead is a good thing. Many aspects of our lives should be planned according to Hyder. “Christmas is a planned event; giving gifts is a planned event. The only thing that is not planned is what you’re going to give, how much and to whom.” By setting aside the funds in advance, the goal is to help alleviate some of the stress that walks hand in hand with the holiday season. “We’re telling you right now how many cards you have to buy because you have a Christmas card list. It’s not just looking at each other over the kitchen table in November and saying, ‘Oh shoot, we got a card from John and Betty. I guess now we have to send one to them.’ It’s the same thing with a gift; figuring out who in your life is important enough to you that you want to give them a gift not simply as a reciprocity issue,” says Hyder.

Gift giving needs to stem from a solid financial plan, not from guilt. “If someone wants to give you a gift and you haven’t spoken to them in five years, that’s nice. But the truth is if you would not even have sent them a card this year, why do you feel the overwhelming sense to do something financially just because they did it to you?”

Hyder compares this advice to a speedbump. “We just want them not to drive 50 miles an hour because that’s the speed limit, we want them to hit a speedbump every so often for us to say, hey there are things we need to think about.” Before you know it, the mistletoe will be hung, lights twinkling and the gifts will be beautifully wrapped. So set down your glass of Christmas Ale, pick up your calculator and prep your plan for the holidays.