Don’t let the heat wave lull you into a savings stupor: The holiday shopping season is just four months (or so) away. That's plenty of time to get your cash flow ready for the priciest time of year — if you start preparing now.
The holidays cost us a big chunk of change: The average American spent close to $1,000 on gifts, food, decorations, flowers, greeting cards and more last year, according to the National Retail Federation. Here are eight easy ways to save that extra grand between now and Black Friday.
1. Set a spending cap
Alternately, establish a savings goal. Consider how much the holidays typically cost you. Review old bank statements to estimate big expenses and make a list to capture less obvious ones: wrapping paper, travel to and from Grandma's house, garland for your tree, etc. Reference your budget to see how much those expenses will up your end-of-year discretionary spending. (Don't have one? This simple spreadsheet can help you out.)
You can use that estimate as your savings goal or, if the numbers are making your eyes bulge, pare back and commit to only spending what's in your holiday savings account this year. Speaking of which ...
2. Open a special savings account
Make it harder to tap the dollars you're saving for the holidays by opening an account specifically for them. Look for a high-yield savings account outside your current financial institution of choice. After the holidays are over, you can convert this account into a "vacation savings" fund or get a head start on Christmas 2019.
3. Pay your gift fund first-ish
Add a line to your budget for holiday savings. The amount could be your spending goal divided by the number of months or weeks between the time you're reading this and Thanksgiving. Use the "pay yourself first" technique to reach your ultimate holiday savings goal. Basically, you're moving some of your take-home pay into your special savings account before spending on non-essentials.
If your special savings goals start eating at larger savings goals or an emergency expense pops up, adjust your spending cap.
4. Cut one unnecessary expense
We're not going to pretend giving up avocado toast is going to fix all your money woes, because, it won't. But giving up a guilty pleasure for the next few months can go a long way toward boosting a holiday savings fund. Let's say you spend $5 each work day on a latte. Forgoing that pick-me-up for office coffee three months out of the holiday shopping season will net you a cool $300.
5. Leverage your credit card
Disciplined spenders with rewards credit cards have two tricks up their sleeve. First, they can cash in current rewards to pay off a purchase or two and free up some funds for their holiday savings account. Second, they can amass rewards to use on holiday gifts by putting stuff they need or can afford on their credit card instead of using cash or debit. If you're worried this strategy could unwittingly lead you to go over budget, pay off purchases each day or week from a linked checking account.
Note: If you're prone to overspending or already drowning in credit card debt, stick to cash and focus on paying off outstanding balances. Fortunately, we've got some ways to pay back credit card debt faster.
6. Consider opening new plastic
If you don't have a rewards credit card or haven't applied for a new one in a while, look into adding one to your wallet. That way, you can earn premium cash back or points on your purchases. Many credit cards come with signup bonuses that let new cardholders earn rewards in bulk when they spend a certain amount of money in their first few months. These bonuses can be lucrative. Thinks $150 to $300 in rewards.
Again, there's a big caveat here: Only consider this strategy if you're a disciplined spender with healthy credit. You don't want to spend just to earn rewards. You want to earn rewards on what you would spend regardless of the bonus. Plus, you need a good score to qualify for the best credit card offers.
7. Get a side gig
If you can't save more, look for ways to earn more. Thanks to the gig economy, there are plenty of side hustles that can boost your cash flow without necessarily taking up a big chunk of time. You can sell gently used goods on sites like Poshmark or eBay, for instance. Check out these other side hustle ideas.
8. Adjust your tax withholding
We're ending with this tip, because it won't help everybody. Your withholding — the amount of money taken out of each paycheck for Uncle Sam — affects the size of your annual tax return. If you're due for a big refund, consider having less money taken out during the year. You'll skip the April windfall, but boost your monthly cash flow and, by extension, your holiday savings fund. On the flip side, if you think you'll owe Uncle Sam at the end of year, you might want to have more money taken from your paychecks.
Major tax changes went into effect in 2018, so you shouldn't use last year's tax return as a guide. Instead, check out the Internal Revenue Service's updated withholding calculator to identify how much of each paycheck you should set aside.