Serving Bread

A few years ago, I got burned by Christmas gifts. When December rolled around, my income was the exact same as it had been the previous month, but I had more expenses disguised as gifts. Like most Americans, I put it on credit and it took me months to pay off that credit card.

Every year it’s the same story—we buy more than we can afford in December and then wonder how we are going to pay for it in January. After that experience, I got smart.

Rather than have an above-average expense for the month of December, I worked Christmas gifts within my monthly budget. I set an amount I felt comfortable spending and I divided that amount into 12, and every month, I put a portion into Savings to save for the Christmas gifts.

What is great about this method is that it allows me to keep annual expenses budgeted. And, it is a little extra money that is earning interest in my Savings account. In the past few years, I began to do this with nearly all of my annual expenses especially my insurance premiums.

Many people may rely on a Christmas bonus to pay for Christmas expenses, but alas my Christmas bonus is usually to spend my time at a conference away from my family. This method has allowed me to keep my budget in check in December (and all other months where annual expenses are due).

Quick summary on how to do it:

1. Itemize all of your annual expenses: Insurance, Taxes, Gifts, etc…
2. Divide the anticipated amount owed by 12
3. Every month, automatically withdraw the amount from your checking into a Savings account (or you can even keep it in a cash envelope at home)
4. Use a spreadsheet to keep track of the amounts you are saving.

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