Happy New Year! Hopefully this year will bring you health, happiness and good fortune.
Now let's start talking about saving for 2010.
But the year just started? That's right. That's why this is the perfect time to start socking money away in a special savings account so that you have cash when the holidays roll around next year!
This article at eHow.com has lots of useful advice on getting out of debt incurred from excessive holiday shopping, but of course it's much better to avoid going into debt in the first place.
How can you avoid holiday-related debts? LaToya Irby has written a useful article at About.com with 8 suggestions for avoiding holiday debts. Some of her bright ideas include shopping with cash rather than credit (that way you can't spend more than you have) and focusing on buying gifts for others, not for yourself.
Irby suggests saving well in advance to make sure you have enough cash to buy gifts without resorting to credit cards. If you're very disciplined with money, you be able to store that cash in your regular savings or checking account, but it might also be useful to open a special (interest-bearing) account devoted just for holiday expenditures or any other special splurges.
Read more about the benefits of this approach in the "Open a Holiday Savings Account" article in the PT Money blog.
Just think - if you set aside $100 a month, you'll have more than $1000 for presents and gifts by the time the winter holidays arrive. Not to mention a few extra dollars in interest income.
What if you have some extra cash on hand right now? Well, you could take advantage of post-holiday sales and stock up on presents early for next year. Or you could look into buying a short-term 3-month or 6-month CD. Sites like Bankrate.com let you find the best CD interest rates.
But depending on how much money you're looking to sock away for the holidays, you may get a better return by looking for special offers that banks sometimes run offering cash bonuses of $100 or so for opening new checking accounts. Just be sure to read all the fine print. Sometimes you'll need to make a couple of check card purchases (even small ones) within a certain time frame to qualify for the bonus.
Why does the bonus make sense over the simpler CD or interest bearing savings account? Well, imagine that you put $1200 into each account on January 1st. With the bonus offer, you get $100 and perhaps spend $2 on little debit card purchases. You then have $1298 by December 1st for holiday purchases.
With interest rates so close to historic lows, you'd be very lucky to find a CD or interest savings account paying anywhere near 2%. Even with 2% interest, you would only earn around $20 by keeping your $1200 in the bank until December.
The math works out even better if you can find a deal that lets you open a new account and get the bonus with a small opening deposit such as $100. In that scenario where you're gradually building up your holiday shopping account incrementally, you'd get much less than $20 at 2% interest, but you'd still get all $100 from the new account bonus, making that clearly the best choice.
And if you don't end up spending all the money in your holiday spending account? Well, you can easily transfer most of it into your general savings account as a special 'Happy New Year' bonus to yourself in 2011!
Have you tried creating a special savings account for holiday purchases? Or do you have some other strategy for maintaining spending discipline around the holidays?