Planning for the holidays or a vacation can be overwhelming. Hence the reason you need a holiday fund.
Here we are going to define what a holiday fund is, how to make your own and the benefits of having one.
A holiday fund is money set aside throughout the year for everything holiday-related.
Holiday-related activities include Christmas, birthdays, vacations, etc.
Building a holiday fund prevents you from struggling for cash when the holidays come around. One of the main benefits of having a holiday fund is that it allows you to have enough money to spend on anything you would like.
And if you don’t end up spending all the money, you can save it up for another occasion or spend that excess money on something else.
There are many advantages of having a holiday fund. Among them are:
1) It’s a great way to avoid debt during the holiday because we tend to overspend and take on debt we didn’t need. A holiday fund can prevent overspending because you know how much there is to spend. Therefore, you can set aside the money for those expenses.
2) Holiday fund equals less stress. Preparing for any holiday can be stressful by itself. Therefore, you don’t want to add money stress to the mix of it all. Saving for your purchases in advance helps to prevent the stress of last-minute shopping and overspending.
3) It prevents you from dipping into your emergency fund. In the event, you do have an emergency fund, you don’t want to be spending on non-emergency items using money from your emergency fund.
Some of you might be wondering, what if I’m in debt? Can I still have a holiday fund?
The answer is Yes!
You can still have a holiday fund while currently in debt. This can be achieved with the right strategy and a good budget system. You’ll be able to pay off your debt while saving for a holiday fund.
A holiday fund and a holiday budget go hand in hand.
It’s important to know how much you plan to spend to know how much to save.
You can create a holiday budget by making a list of gifts of what and who you want to buy for, and then decide how much you would like to spend.
To know how much money to save monthly for your holiday fund, you can determine the total amount of money you require for the holiday and then divide that by 12 to get your monthly savings.
Are you ready to build a holiday fund but don’t know how? Here are a few tips on how to get started:
1) Create a separate account just for holiday spending2) Create a saving goal and set up an automatic deposit3) Consider a cash-back credit card4) Start a side hustle just for your holiday fund
It’s never too late to start a holiday fund. So even if you’re reading this now, you still have time to save for the winter holiday.
Bear in mind that a holiday fund doesn’t mean saving for the Christmas season only. It’s an all-year-round saving for any holiday. By creating a holiday fund, no matter what time of the year, you can reap the benefits of your savings when any holiday comes around.
Keisha Bailey is an experienced investment strategist who teaches people how to earn passive income, create wealth, reclaim time and reach financial freedom by investing. She works with investors to create highly profitable portfolios so that they can build wealth faster. If you want to learn how to level up your money, she can be reached at [email protected]