Christmas Club

How Not To Bust Your Holiday Budget

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The holiday shopping season is in full swing. The malls are packed with eager shoppers. Offers and promotions are coming from clothing stores, electronics retailers and other shopping sites. They’re probably flooding your inbox, and your physical mailbox is getting overloaded with catalogs from shops you haven’t bought anything from in years, if ever. 

If you’re wondering how you’re going to pay for this frenzy of shopping while keeping your checking account in the black, you’re not alone. According a T. Rowe Price survey, more than half of parents will aim to get everything on their kids’ wish lists this year, spending an average of $422 per child. 

Many of these parents will be paying for these gifts for months, or even years, afterward. But what’s a busted budget next to holiday cheer, right? 

Of course, before approaching any large-cost event, it’s smart to create a budget. Unfortunately, 58% of the parents surveyed admitted that they thought they had created a budget, but didn’t stick to it. Nearly two-thirds admit they spend more than they can afford. The Sym’s clothing-store chain was famous for its tagline: An educated consumer is our best customer. Take a page out of their book and become an educated shopper this holiday season. It will empower you to make informed decisions about your spending before you hit the shops.
 

Short-term effects

Tipping your budget just a bit every once in a while isn’t a disaster. You can plan to spend less the next month or pay off your debt with an expected surplus of funds. But the spending hangover some parents can face from their holiday shopping is too large to be easily forgotten.

Over half the parents surveyed will pay for their holiday gifts with credit cards. Just 61% of them plan to pay off their spending within three months, and 16% say they will pay it off over the course of six months or more. That’s half a year spent catching up on holiday spending!

Think carefully this shopping season before you drop another item into your cart. Is this gift really worth trimming your budget for the next three – or six – months?

Long-lasting effects

Even more alarming than paying off holiday debt for half a year is the one-quarter of the parents who have taken extreme measures to fund their purchases: 11% have used money from their retirement accounts, 14% have taken funds out of their emergency savings and 11% have taken out a payday loan.

While their kids may be delighted with their loot, parents can be paying for it for longer than they think.

Taking $500 out of a 401(k) at age 35 translates into giving up $6,000 that was earmarked for retirement. Parents are forking out additional taxes and penalties to gain access to the money, and are also losing the opportunity for that money to grow.

Your kids may be thrilled that you’re thinking of the here and now, but you’ll pay the price for living in the moment sometime in the future. Make sure each purchase is justified and worth paying off over the long term.

Life Lessons

There’s nothing quite as exciting as unwrapping a present. There’s the thrill of the unknown, of guessing what lies under the colorful wrapping paper, and the delighted whoop when the surprise is something you’ve been hoping to receive.

And this thrill is intensified in children. Kids wait all year for that moment of ripping open their gifts, and as their parents, you want to make them happy. This is why 60% of the parents surveyed claimed they will try to check off every single item on their child’s wish list.
But giving in to all their demands does nobody any favors.
Aside from the financial drain, purchasing every gift your kids have their hearts set on teaches them a host of lessons they’re better off without. Childhood is the time to create lifetime habits and mindsets. Do you really want your kids thinking they can always have everything they want? Do you want them to feel that everything they own must always be the best and most expensive?

Of course, this doesn’t mean skipping all or most of the items on your kids’ lists. But try to trim down where possible. Whether it’s a new toy, electronic device or even their own car; teaching your kids to be happy with a cheaper version, or to forgo one or more items on the list, will be a lesson they will carry for life.

This holiday season, teach your kids that true happiness can’t be bought.

Be proactive

You can beat the budget-busting this season by saving up for the holiday season throughout the year. While it may be too late for this year, it’s never too early to start thinking about next season! Just a little bit of money put aside each month can take you through the holiday season without any long-lasting scars. Sign up for our holiday club accounts, if you haven’t already done so.

Be an informed shopper this holiday season and your decisions will pay off in more ways than one.

Your Turn: How will you fund your holiday spending? Do you plan to buy your kids everything on their lists? Why or why not?
SOURCES:
http://money.cnn.com/2016/11/02/pf/parents-holiday-spending/index.html?category=pf

Holiday Spending Is Getting Smarter, But You Can Be Smarter Still

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The average American will spend nearly $900 on holiday presents this year. If you have two adults in your household, that’s almost $1,800. The odds are good that you’ve already spent a good chunk of that on Black Friday, Small Business Saturday, and Cyber Monday specials.  In looking at the sales numbers from the weekend, Americans are getting smarter about how they spend that money.  Brick and mortar stores suffered about a billion-dollar decrease in sales from 2014, largely avoiding many of the big-ticket items that lure customers into waiting overnight in cold parking lot lines.  Instead, consumers pushed online purchases to a record high of $4.45 billion, roughly 20 percent more than last year. At the time of this writing, Cyber Monday sales had not yet been released, so we can’t compare those. 
In addition to this, sales numbers indicate earlier spending, more diversified spending and shopping carts that were more full at fewer locations.  All of this points to people purchasing items they had selected before the big weekend sales, then spending less time browsing and far less time in the harsh winter conditions and occasional inhuman violence that only cheap electronics and toys can provoke.
Even with the transition to warmer, quicker and more pajama-clad shopping, the money being spent is astounding.  The odds are also good that you don’t remember everything you bought for the holidays last year, and even if you do remember what you were given, it probably doesn’t add up to hundreds of dollars worth of things you still use.  If you don’t remember or use what you were given, the people who received gifts from you probably don’t either.  So why do we insist on spending so much of our hard-earned money on cheap plastic junk? Is there a better way to spend that money?
Yes, we’re getting smarter about how we spend on the holidays. But let’s set up a plan today to be in an even better position at this time next year. 
Step One:  How much did you spend or will you spend this year? 
Consider how much you’re going to spend this year.  If you’ve finished your shopping, then you can use your receipts.  Otherwise, you can estimate what else you plan to buy or just use the $900 per person national average.
Next, add to that how much you’ll spend in interest on credit cards while you pay off the balances.  If you’d like to avoid the math, you can estimate that the total cost is $1,000, because that’s a nice round number for this exercise. 
Step Two:  Putting away that money for next year. 
To use this money as intelligently as possible, it’s a good idea to save as much as possible ahead of time.  That way, compound interest is in your favor instead of working against you.  Start with one of our savings plans. A great option is our Holiday Club, which offers easy automatic deposits and doesn’t let you withdraw prior to the due date without a penalty. If you are more disciplined and not worried about using the money prior to the holidays, another option is our High Yield Account, which will pay a higher dividend if you’re ready to put the money into savings today.  
Step Three:  Paying off this Christmas. 
It’s time to get those credit card payments down so we can move into the new year with a clean ledger.  If you’ve got the extra income, pay them down with that, but we also know times are a little tighter for many of us.  Luckily, your credit union has a variety of solutions for paying down credit card debt: 
  • Home equity loans are great for high balances, because they turn high interest credit card debt into low interest home equity debt.  Also, if the Federal Reserve raises the prime interest rate early next year, you’ll be protected by a fixed-rate loan.  If you don’t want all the math, a home equity loan reduces the interest you pay, so you can pay off your loan more quickly.
  • If you don’t want a home equity loan, your credit card debt isn’t that high, or you don’t own a home, you could also consider transferring your higher rate balances to a Destinations MasterCard Credit Card.  We offer incredibly low rates, so you can transfer your higher interest balances onto a lower interest card, which will let you pay off the debt more quickly. Plus, there is no fee for balance transfers and no annual fee for the card.

Step Four:  Cutting costs. 

Make a list of everyone for whom you’ve bought gifts and how much you spent or will spend.  Then, go through and imagine what would happen if you got them nothing.  Would life be worse?  Would it be embarrassing?  Do you really need to give everyone something?  For those you feel an obligation to gift, keep them on the list for next year. For those you don’t, send them a card.  For anyone about whom you’re unsure, how about a gift of home baked cookies? Simply cutting out a few people can save you several hundred dollars every year.  Ask yourself:  would I rather avoid a potentially awkward situation or have a new … well, you probably know what you’d rather buy with several hundred dollars.
If you’re worried about last minute awkwardness in case someone gets you something, there’s a really simple solution:  Buy a few cards, write a general inscription inside, sign them, and add a gift card to a big store you’d shop at anyway.  Would anyone be upset at an Amazon gift card?  Then, if you need it, you can write the name of the person in question on the envelope and hand it to them.  If you happen to have any of these standby gifts left at the end of the holiday, the gift cards are yours to keep:  call it profit. 
Step Five:  What will you do with your money? 
At this point, you’ve paid off holiday 2015, and by the time holiday 2016 rolls around, you’ll have saved more money than you need since you saved enough for this year but cut costs for next year. Interest has worked in your favor, and suddenly your next December is one in which your pockets will be full.  That gives you 12 months to decide what to do with your money.  Reinvest it in a savings plan? Buy supplies to open that web store you’ve always wanted? Take a class or learn a language? Maybe your dog needs a little brother or sister.
Whatever you do, it’s probably going to be better than that necktie you got for Bob in accounting this year, and it’s all for you. 
Sources: 
http://www.zacks.com/stock/news/199560/why-did-black-friday-sales-fall-by-1-billion?cid=CS-GOOGLE-FT-199560&google_editors_picks=true   
http://www.statista.com/statistics/319562/us-consumer-spending-by-seasonal-event/ 
http://fortune.com/2015/02/12/nrf-retail-forecast-2015/  

Keep Yourself Safe During The Holiday Season

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Every year, we hear about the same holiday safety tips – don’t drive tired, don’t drive drunk, assume every other driver is drunk and/or tired, etc. Those are all good ideas to keep in mind year-round. Occasionally, we’ll hear one that’s specific to the season, like how frying turkey in the driveway is as dangerous as it is delicious, and it’s also not something to try while drinking or overly tired. Unfortunately, this time of year is also one of financial dangers, many of which you won’t hear about on the morning news or read about in the paper.  Take some time, read our tips, and hopefully you won’t be a holiday victim. 

Keep an eye on your surroundings – Crowded malls and shopping centers are a savory opportunity for pickpockets.  You’re expecting to get bumped and won’t notice one more jostle in a day full of them.  If you do recognize you’ve been robbed, the thief can probably get away into the crowd, disappearing like a needle in a haystack.  Purses should be worn across the body, wallets kept in the front pocket or inside a closed jacket.  Consider leaving the house with the bare minimum, such as your driver’s license or ID, health insurance card and our debit card – which offers fraud protection and security features not available with cash. 

RFID, RFID, RFID – Today’s pickpockets don’t need to take your wallet to cause you problems, because many modern debit and credit cards emit RFID signals with personally identifying information.  If any of your cards have a chip, then you need to account for them. Check our RFID wallet guide for some tips. In a pinch, you can wrap chipped cards in two layers of aluminum foil, which will offer you protection from high-tech pickpockets, but you may get some bewildered stares or questions from folks at the register.

 

Don’t leave checks in the mailbox – At some point, we all learned not to use those colorful envelopes that tell thieves which cards might have checks in them, but we never learned the next step: Don’t put checks in the mailbox at all.  It’s not hard for thieves to grab stuff out of the outgoing mail, whether it has the power company’s name on it or is shaped like a holiday card.  Drop all checks into a big blue mailbox, bring them into your post office branch, or hand them to your postal carrier in person.  By the way, this tip should be followed year-round, and you might want to consider setting up our online bill pay feature to minimize the number of checks you write, as well. 

Understand the dangers of every form of payment – Every form of payment has its dangers.  Cash is portable and untraceable, so it’s a target for thieves.  Cards without EMV chips are in danger from skimmers built into the card reader at registers (like what happened at Target).  EMV cards can be skimmed by people with specialized equipment who bump up next to you.  All cards, cash and mobile phones are in danger of being stolen.  Some experts are even saying that check fraud will be the most dangerous type of identity theft over the next five years.  Even if you attempt to return to agrarian-era bartering, an enterprising thief could run off with the cow you were going to trade for an Old Navy gift card.

Take a breath, recognize the dangers and take reasonable precautions. Do you know what kind of fraud protection you have on each of your credit cards?  Any card about which you’re unsure needs to stay home until you find out.  Unsure about a small boutique’s cyber security? Bring cash. 
Bring your own bag – Shopping bags are a great way for stores to advertise, but they also advertise to thieves.  “This overburdened, overtired, potentially unwary individual is carrying goods from all of these stores,” the bags say “some may even have receipts in them and might have been paid for with cash.” Don’t make it easier for thieves. Instead, bring a tote bag that zips up if you have one, or your canvas grocery bags if you don’t. 
Take a trip to the car – Carrying too much is asking for trouble.  It makes you less mobile, you’re less likely to feel someone remove an item from your bags, and even if no one hassles you, it’s a good way to end up with back pain.  If you’re enduring a marathon trip to the mall, take time every few stores to take your purchases out to the car. Keep receipts in your wallet and take pictures of the bags you put in your trunk (where thieves can’t see), so even in the worst possible scenario, your car insurance can cover the loss of your shopping from a car thief.
Plus, you’ll have less to carry, you’ll get some exercise, and the cold air can help you clear your head to decide if you need to purchase anything else.  Not a bad way to keep from overspending! 
Buy yourself a holiday drink from the coffee shop – You’re probably safer if you’re alert, but that’s just an excuse.  Holiday coffee drinks are delicious, you want one, and we just gave you an awesome excuse to justify the everyday luxury of a peppermint mocha to yourself.  You’re welcome. 
January is coming, be ready – If you’re going to binge on holiday shopping in December, you’ll need to purge in January.  Keep all of your receipts and do an extra-careful reconciliation of your accounts in January.  Be ready to spend a few afternoons making phone calls to make sure every charge is correct and accounted for.  Make sure to check your credit report in January as well.  While you’re checking your credit and your accounts, take the opportunity to start the new year off right:  you have your financial info gathered already, you have your credit report in front of you and your W-2s are starting to show up, so it’s time to do three things:
  1. File your taxes.  Don’t get mad at us, it’s not our fault.  We’re only reminding you to do it early because you’ll already have most of what you’ll need, so getting your homework done on Friday will give you the rest of the weekend off. And don’t forget to have any refund directly deposited to your Destinations account.
  2. Rework your debt.  You have every one of your credit card and other account statements in front of you, so it’s time to make some calls.  For your higher interest cards, it’s time to pay them down, transfer the balances to a MasterCard at Destinations Credit Union or negotiate a lower rate.  This is easier if you’ve got some cash in hand, possibly from the tax refund you now know you’re getting.  You can also take this time to explore using your home equity to eliminate some of the high-interest cards. 
  3. Set up a Holiday Club for 2016.  Alright, you just saw how much money you spent this holiday season.  Next year, resolve to do it all without taking on unnecessary debt.  You’ll save a ton of money and a ton of stress.  The best way to do that is with one of our Holiday Club accounts.  Use this year’s budget as a guide. Next year will be a breeze.

And that’s it.  It sounds like a lot, but it’s really taking the same level of vigilance you would use for normal shopping and increasing it to correspond with the increased spending of the season.  For a good rule of thumb, maybe we should just establish the “3-Mariah” rule:  Once you hear Mariah Carey’s “All I Want for Christmas is You” for the third time on any day, you have to go home – you’ve either spent too long at the mall, or your brain has been turned into holiday slurry and you can no longer be trusted to remain vigilant.  Three Mariahs and you’re out.

It’s Almost Halloween, So Let’s Talk Christmas

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Football has begun, the leaves are changing and the kids are back in school. Clearly, it’s time to start thinking about Christmas.  Some of you are reading this on your phone while waiting in line at Starbucks, preparing to buy your first Pumpkin Spice Latte of the season, but it’s time to start thinking of peppermint mochas instead.  Even if you’re the “Bah, Humbug” type of person who regularly posts Facebook rants about the neighbors putting up their lights before Thanksgiving, making financial plans for the holiday is still a really good idea.  It might be too early to hang a stocking, but it’s never too early to sock money away.

Question: How much will I be spending on the holidays this year?

Answer:  Recent studies have pegged the price of the holidays at roughly $300 per child, while one in 10 shoppers admit to spending over $500 on gifts for their children.  Overall, Americans spent about $600 billion on Christmas last year, which comes out to around $2,000 per person. This includes decorations, hams, ugly sweaters, and whatever else you tend to buy.  That’s a lot of money.

Question:  Ugh.  Why are we even talking about that money now? It’s not even Halloween!

Answer:  Halloween is exactly why we should make plans now.  Since 2005, American spending on Halloween has spiked.  Last year, we spent about $7 billion on Halloween, including $350 million on costumes for our pets!  It’s easy to overspend in October, let that lead into an indulgent Thanksgiving in November, and then find ourselves putting all our Christmas spending onto a high-interest-rate credit card.  Planning ahead is a necessary step to prevent you from a holiday hangover in the New Year.

Question:  How bad is it to put Christmas on a credit card?

Answer:  It might be worse than you think.  It’ll cost you about $200 per month to pay off an average Christmas debt in time for next year if using a typical high-interest credit card. And if you don’t pay it off by next year, you’re suddenly trying to pay off two holidays at once. That’s bad news.  Even if you think you can handle the extra debt load, remember that the Fed just raised rates, and it may do so again. Whenever it does, you can expect your credit card bill to go up.  On top of all that, paying around $400 in interest charges and fees over the course of the year is still $400.  That’s probably enough money to turn your average Christmas into something worthy of a televised Christmas special.  If you have to use a credit card, make sure it’s a low rate card like your Destinations MasterCard.

Question:  Is it too late to get ahead for this year?

Answer:  Not at all.  You have a lot of options to save yourself from your own spending.  You can sign up for a Holiday Club account, a High Yield Account or a variety of other plans.  But that’s not the only approach.  You can also get ahead of the rate hikes by moving all of your credit card debt into a home equity loan (check out our rates) or signing up for one of our low-interest credit cards.

But even all those options don’t represent all the various ways to save money. Remember that Christmas spending doesn’t have to be an all-or-nothing proposition.  You can combine savings, credit cards and budgeting to attack the holiday from several angles.  Start now, and by Christmas you’ll have a well-stocked war chest, or in this case, toy chest, to give you a variety of options.

Question:  What about the holidays between now and then?

Answer:  Between Halloween and Thanksgiving, Americans spend around $150 per person on average, which is far more affordable than Christmas. But that can still add up quickly, especially in larger families.  It can also be difficult to tighten the belt at this time of year, because it can mean less candy and less family time for the kids.  If you’re worried about this spending, one way to rein it in is to make a combined holiday budget you pay into every month.  Figure out how much you plan to spend on birthdays, holidays, anniversaries and the like, then divide that by 12.  That’s how much you need to put away every month.  Does that sound like a lot of money?  Then you can cut down all year long.  Maybe you don’t need to send birthday gifts to as many people or your anniversary can be a smaller occasion this year. The bottom line: If you start planning ahead, you can keep your holiday spending from being an obstacle to your financial future.

Sources:

http://www.bankrate.com/calculators/credit-cards/credit-card-payoff-calculator.aspx?MSA=&&&&

http://theeconomiccollapseblog.com/archives/guess-how-much-americans-plan-to-spend-on-christmas-and-halloween-this-year
http://www.today.com/parents/yes-we-spoil-our-kids-6-000-moms-come-clean-1C7397939
http://www.theatlantic.com/business/archive/2011/10/the-halloween-economy-2-billion-in-candy-300-million-in-pet-costumes/247531/
http://abcnews.go.com/WN/mailform?id=14998335

New School Year’s Resolutions

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Ah, autumn.  That wonderful time of year when the leaves change color, football takes over the television for five uninterrupted months and students head back to school. Alright, it’s not actually autumn, it’s August. It’s still summer outside, and more of the country is watching grass turn brown than observing the leaves transitioning to orange. School is starting, though, and you’ve probably already gone through a lot of the rituals that accompany a new school year, so you may be in a back-to-school mood. 
Here’s a tradition you might not have tried: Have you made a new school year’s resolution?
We’re not talking about those promises you make to yourself every year about doing homework on Friday nights or not wearing sweatpants to class.  Have you made a resolution for this year that you actually intend to keep?  Now is the perfect time to make a change, while you’ve got a new planner just waiting to have milestones and goals written into it.  We’ve got some tips to aid you in keeping your resolution this school year.
 
First, set a clear goal.  Goals are only as useful as they are attainable, and goals are only attainable if they’re clearly articulated.  For example, “I want to eat better” is an admirable goal, but it’s difficult to figure out if you’ve actually done it or how that affects your decisions. Eating two cookies is better than three, for example, but would you have eaten three cookies before?
That’s why it’s important to be specific. Instead of saying, “I want to be better with money so I won’t need to eat toast sandwiches at the end of the month,” try making a resolution like “I won’t date freshmen” or “I will set a budget every month.”  You can tell if you’ve set a budget even if you don’t always do a good job of following it.  Having a tangible goal gives you freedom as well.  Are you being good with your money if you buy a latte every once in a while?  Who can tell?  But if you have a budget, you can clearly see when you can afford a latte, and what else you might have to give up to get it. 
You also need to keep the goal simple enough so it is achievable.  “I’m going to work out for two hours every day” sounds great … for about a week.  Then it sounds like a hassle.  What do you do for two hours every day that you’re willing to give up?  Sleep? Homework? Xbox?  An easy to achieve resolution might be something like “I will spend Monday afternoons cleaning,” or “I’ll save $1,000 to put a down payment on a car within a year.”  Saving $1,000 might sound harder than working out, but it’s really not.  Put $85 per month away for a year or $43 per month for two years.  Even if you make minimum wage, $43 is only about one day’s salary each month.
It’s easy to fool yourself into believing you’re living up to your resolutions, which is why you need someone to keep you accountable and help you out when you need it.  That’s a place where Destinations Credit Union can really help.  We’ve got internal experts in budgeting and financial counseling partners who’d love to talk to you, and we offer great rates on Kasasa Cash Rewards Checking, Savings Certificates, Holiday Club accounts, and all sorts of savings plans to make saving for that down payment even easier.  We also have tools, such as MoneyDesktop and simple budgeting software.