The holiday season can be punishing for anyone on a budget, with many forced to tighten their belts in January to recover from the financial hangover of Christmas spending.
It may seem early to start thinking about the holidays before trick-or-treaters come out for Halloween but financial expert Hillary Seiler says that now is the perfect time to plan ahead – and her advice could spare shoppers a new year debt spiral.
Seiler, the founder of Financial Footwork, told the Daily Mail that creating a ‘sinking fund’ – a pot of cash set aside for large and infrequent expenses – can prevent shoppers from having to make large withdrawals or resort to credit cards.
A personal finance coach who works with NBA and NFL teams including the Indianapolis Colts, Chicago Bears, Green Bay Packers and LSU Football, she advises planning ahead by setting a goal for money needed during the holiday season and transferring cash each pay period.
‘This keeps you out of credit card debt and helps you skip the January financial hangover,’ Seiler told the Daily Mail.
‘You’re treating Christmas like any other bill you pay each month – planned and handled,’ she said.
For example, there are just under eight weeks left until December. For those paid biweekly, that means there are four paychecks left.
If the goal is to save $1,000 for holiday shopping, setting aside $250 each paycheck from now until December would hit the target in time for the Christmas season.
Seiler is a finance coach and works with a slew of NBA and NFL teams, including the Indianapolis Colts, Chicago Bears, Green Bay Packers and LSU Football
Seiler also recommends setting up an automatic transfer so the money goes out at source without any thought required and before it can be spent.
The Christmas season – often referred to as the ‘golden quarter’ in retail – is the most significant economic stimulus worldwide.
Last year, holiday shopping rose to record highs with an astronomical $973 billion in sales in the US, according to data from Statista.
Consumers were also spending more money than ever on Christmas, with the average budget exceeding $1,000.
Shoppers are starting earlier, too. Sixteen percent of respondents told Statista that they had already begun buying gifts and decorations over the summer, with 77 percent intending to start between September and November.
‘Breaking big expenses into small, manageable pieces makes them easier to handle,’ Seiler said.
‘And this strategy works for more than just the holidays, too, because your budget should reflect your life.
‘Birthdays, vacations and back-to-school shopping can all be planned and budgeted for with a dedicated sinking fund.’
Seiler (pictured) works with NBA and NFL teams on personal finance. She told Daily Mail sinking funds can help anyone reach their financial goals
Although the holiday season can bring joy and traditions, it can be met with increasing amounts of stress due to the financial burden
Seiler revealed her top tips in her new book Train Your Money
Sinking funds can help accomplish savings goals, including cash for gifts, vacations, a new car or appliance, weddings or even a down payment for a home.
They differ from emergency funds, which are intended for unexpected expenses, such as job loss, urgent repairs or medical bills.
However, a separate sinking fund for planned expenses means that people don’t have to rely on dipping into those emergency savings.
CNBC recommends keeping cash for a sinking fund in a high-yield savings account, making it accessible but not tied to a debit card.
Some high-yield savings accounts offer ATM cards so it’s easier to withdraw cash. Those prone to impulse buys, however, might be best advised to steer clear of opting for an account with a card.
Keeping the funds in an investment account is also not recommended because withdrawing the funds too soon could lead to taking a loss and such accounts can be subject to taxes.
CNBC highlights Goldman Sachs High Yield Online Savings for sinking funds because there is no minimum balance or monthly fees.
This article was originally published by a www.dailymail.co.uk . Read the Original article here. .