Category: Personal Finance

I have friends that give incredible gifts for Christmas!  Sometimes it makes me uncomfortable to think how much money they spent on me.  One Christmas, I had a friend who gave me a Coach bag.  That’s great, except I knew she and her husband did not have a large income and I couldn’t help but think that must have really stretched them to be able to do that for me.  Another Christmas, I had a different friend give me an expensive bottle of perfume AND the newest Fitbit watch.  I’m pretty sure she spent more on me than my own husband did (because we were on a tight budget trying to get out of debt) and she was living on government assistance while unemployed.  It just felt wrong!  I have had family members give me gifts in boxes that included their receipt details down to the payment plan because they FINANCED the gifts they gave me. 

I obviously have some very generous people in my life who I am extremely grateful for.  Maybe you are one of those people or have gone to similar measures in your Christmas gifting.  I have heard of so many people who put all their Christmas gifts on credit cards and spent the next few months trying to pay them off.  I whole-heartedly believe that is not how God intended our giving to be.  Christmas is about celebrating THE GIFT God gave to us to pay our debt of sin, it can’t possibly be right for us to put ourselves into debt for this special holiday.

I consider myself generous, but I also consider myself frugal.  How can you be both?  Here are my 5 tips on how to purchase incredible gifts for your friends and family members without blowing your own budget, putting financial strain on yourself, and without the payments following you into the new year. 

• Plan Ahead

Make a list of all the people you want to purchase gifts for and start brainstorming what kinds of things you would like to buy for them.  Do this AT LEAST 2 months before Christmas.  If you’re a planner like me, you may start this even sooner.  The reason I say at least 2 months is so you have at least a couple of weeks to think about it and remember people to add to your list before you start doing your research in the next tip.

• Utilize Black Friday and Cyber Monday Deals

By mid-November you should have a list of people to buy for a gift ideas for them.  Black Friday ads are often available a week or two (sometimes more) in advance.  I use bestblackfriday.com and Brad’s Deals for early access to those ads.  This is how you will find the best deals on your gifts.  Most deals are available online, so you don’t even have to brave the crowds if you don’t want to.  Also, many sales are available online earlier in the week as well!  Trust me, the deals are worth the planning ahead! 

• Put Aside Money Throughout the Year

I use an envelope that I put in a locked safe at home and add to it gradually from January through December.  Add this category as a line item in your monthly budget and pull out cash every month to add to the envelope.  Some months are tighter than others, so I may not be able to add as much to the envelope as other months.  Some months I have birthdays or showers to attend that I will need to use money I would otherwise be adding to the envelope to save for Christmas.  That’s OK!  There is not a perfect formula for this!  The point is to consistently add to the envelope as often as you can to create a habit out of it.  You will be AMAZED by the time the Christmas season comes how much stress is relieved by having this envelope full of cash stashed away.  It actually makes Christmas shopping way more fun!

• Set a Budget –and Stick to it!

Once you’ve made your list of people and gift ideas and know how much money is in your envelope, you should decide how much you are going to spend on each person.  This is important, because if you don’t plan this part out, you will potentially get yourself in way over your head.  I tend to categorize people (immediate family, extended family, close friends, friends, Pastors, teachers, etc.) and set an amount for each individual in those categories.  For example, immediate family gets $100 each, extended family gets $50 each, close friends get $50 each, etc.  You decide your amounts, I’m just trying to create a picture of what this looks like.  Also, DON’T FORGET those white elephant gifts for Christmas parties.  Most of us can anticipate how many Christmas parties we will attend each year (Office, Church, Small Groups).  Many of those parties you will be expected to bring a gift of a certain monetary value to.  Can you purchase something worth $20 for $10 on Black Friday?  Yes, you can!  So, add those parties to your list too!

• Talk to Your Friends and Family about Gift Expectations

If you have a really large family of Siblings, Aunts, Uncles, Cousins, Nieces, Nephews and it starts to get overwhelming to think of how many people you have to buy for and how much money you will have to spend, you are likely not the only one in your family feeling that way.  It may be helpful to have a conversation with your family about drawing names so rather than everyone buying a gift for everyone, everyone only buys a gift for 1 or 2 people.  Way less stress for sure!  I know that plan doesn’t work for all families, but if it will work for yours, try it out!  My family uses an app called Elfster to put gift ideas of all different price ranges on their “wish lists” to help ease the frustration of coming up with ideas they will love (maybe that’s one of your spiritual gift, but it most definitely is not mine!)  I like to know what people want so I don’t end up getting them something they don’t even like or will never use.

Christmas is not supposed to be stressful, and if you are stressed, you’re doing it wrong.

Try some of these ideas and see what works for you.  Feel free to tweak the ideas to fit you and your lifestyle as well.  This is what has worked for me for years and I don’t want to withhold potentially helpful information from you.  You’ve got this!  You CAN make Christmas fun and stress-free!

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There are 3 things you want to do before you do anything else when creating a financial plan.  They are simple, and yet daunting at the same time.  It feels like they are so time consuming and will take FOREVER!  In our fast-paced culture, and get it done NOW mentalities, doing 3 things that may take 1-2 hours EACH seems unrealistic.  But seriously, how many hours did you spend on social media this week?  How much time did you spend in front of the TV?  Whatever else your guilty pleasure may be, don’t you think it is worth a small sacrifice to make sure you and your family are going to be taken care of?  It is truly a small price to pay.  You just have to make the choice to do them. 

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1. Get the Right Amount of Term Life Insurance in Place

The first building block to creating your financial plan is to make sure the loved ones in your life will be taken care of after your gone.  None of us like thinking about dying and I am not speaking that over anyone.  The fact is we are all one day closer to the end of our lives today, and the fallen world we live in includes unfortunate and unexpected accidents and illnesses.  If you have family members relying on your income for everyday expenses (e.g spouse, children), you NEED life insurance!  What is life insurance?  Life insurance is an insurance policy that you pay monthly, quarterly, or annual premiums for and when you die, the person you have selected as your beneficiary receives a lump-sum of money.  This is crucial for your family whether you earn an income to keep your family fed or you stay at home with kids, clean the house, and make meals.  If you earn an income, you need to replace your income for your family with your life insurance policy.  If you are a stay-at-home parent, you need to provide funds for your children to be cared for and fed if you were not there to do it anymore. 

How much life insurance should you get?  Dave Ramsey recommends 10 times your annual income in life insurance and I agree.  For example, if you earn $50,000 per year, you should have $500,000 in life insurance coverage.  The reason for this is your beneficiary can take that lump sum of money and invest it in good growth-stock mutual funds.  Let’s say those mutual funds earn an average of 10% interest per year.  Is 10% of $500,000 equal to $50,000?  Yes, it is.  Your income has just been replaced and your family has not had to change their lifestyle or living situation in addition to facing the tragedy of the loss of you.  That is the best way to say “I love you” to your family.  If you are a stay-at-home parent, calculate how much it would cost to hire childcare, a housekeeper, a cook, and/or personal assistant to do all the jobs you do every day and week.  Now multiply that total annual cost by 10 so your family can do the same with that lump-sum—invest it and pay for those expenses with the interest it earns. 

The best life insurance available is TERM life insurance.  Don’t let anyone tell you otherwise.  Don’t even argue with anyone about it, just know it.  I will tell you why.  There are other products out there with the name “life insurance” on them (e.g whole life, universal life, etc.)  The problem with these other life insurance products is they have a secondary part to them outside of the part where they pay your beneficiary money when you pass on.  They often include an additional “savings” feature.  They are often 10 times more expensive than term life insurance policies because of this feature and all the extra fees.  Now you might be asking, what is so bad about having an extra savings account?  Isn’t that the goal?  Yes, you want to save and invest, BUT you want your savings and investments to be just that, and not tied to anything else.  Your investments have the potential to grow at a much greater rate when you are able to control what your money is invested in.  PLUS, what the insurance companies don’t like to tell you (because they make A LOT of money on these products) is that when you die, they give you the face amount, but NOT your savings account.  WHAT?!?!  You’ve been paying extra for this policy so you could have this extra savings feature, but when you die, they keep the savings?  Yep!  See why it is important to keep your investments separate from your insurance?  Because if you paid for a cheaper TERM life insurance policy and took that extra money they would have charged you on the other life insurance with the savings feature and put that money in a savings account or investment instead, when you die, your beneficiary receives the face amount of your policy AND your hard-earned savings.  Now your family is even more taken care of!  The last selling point they will use for these other life insurance policies is that they last you’re your WHOLE life, not just for a period of time.  If you are serious about getting your finances in order, getting out of debt, and investing for your future, there will be a point in time you will be considered self-insured and you won’t NEED a life insurance policy anymore.  Let’s say you get out of debt, get your kids through college and they are successfully living on their own, your home is paid for, and you and your spouse have been diligently saving for retirement for many years.  At that point, you don’t need life insurance anymore because your family will financially be ok if you were gone.  My point is, you don’t need life insurance for your whole life.  You need it for 15-30 years depending on where you are in life when you start.  A term life policy is your answer, and it is incredibly cheap. 

2. Do a Monthly Budget

Start now and don’t ever stop!  This is something you will do FOREVER!  Make it your new habit.  Trust me, it’s not as bad as it sounds.  In the beginning it took me nearly an hour to set up the budget for each month.  There was a lot of trial and error.  For me, it came down to having the right tools in place.  I first tried doing it with a pencil and paper using different templates, then I created an excel spreadsheet, next I tried using several different online budgeting tools.  The one I landed on and continue to find the easiest and quickest to use is EveryDollar.  There is a website as well as an app you can download to your phone.  They have a free version where you manually enter your transactions or a paid version (annual subscription) that links to your bank account and automatically loads all of your debit transactions for you to categorize.  I’ve used both.  Obviously, the manual one is slightly more time consuming and the paid-for version is faster, but that’s the only difference.  Everything else functions EXACTLY the same! 

Setting up your budget for the first time is the most difficult one, but again, depending on the tool you use, it could make it easier.  To start, you need basic categories and subcategories for your “budget items.”  Examples of categories could be housing, transportation, food, etc.  Examples of subcategories for housing could be rent/mortgage, electricity, water, lawn, security, repairs, etc.  When I set up my very first budget, I didn’t want to be guessing, so I printed off my bank statement from the previous month and did a retrospective budget, putting every transaction into categories andsub-categories.  I gotta tell you, it BLEW MY MIND to see where all of my money was going.  Full disclosure, I had spent over $2,000 between Wal-mart and Target and had NO IDEA what I had bought!  That’s why it is so important to be intentional.  Dave Ramsey says “A budget is telling your money where to go, instead of wondering where it went.”  Let’s just say after that eye-opener, my “grocery” category went on a diet.  The most amazing and liberating thing about the whole process was that I could free up so much cash that I was missing out on before and use that extra money to pay off debt and save!  It actually felt like I got a raise!  I wasn’t sure how it was possible to pay off over $100,000 debt within 2 years until I saw these numbers (more on my personal debt-free journey in another post). 

Just like learning any new skill, it takes time and practice to get the hang of it.  Have patience and give yourself grace, but commit to becoming good at it!  It will change your life for the better!

3. Create a Will

I’ll be honest, I put off creating a will for far too long (like, years!)  And I had every excuse in the book not to do it (I’m going to have more kids, our financial situation may change soon, we might move soon, how much is this going to cost?, I don’t have time!)  I know you make excuses for not doing very important things too, so don’t judge me.  When it comes down to it, I don’t want the government to decide what to do with my child and my money, so I sucked it up and did it. 

The best way to do a will is to just sit down and knock it out.  I used US Legal Forms to purchase the correct will for my state and family situation.  What I loved about their forms is it gave me a step-by-step process in how to fill them out.  These are very legalese forms that when looking at it by itself, requires a lawyer to interpret.  US Legal Forms provided a guide with my form that told me exactly what to write in for each space.  Once complete, you have to take to a notary and have a couple of witnesses sign it as well.  That’s it!  Step 1: fill it out.  Step 2: sign it in front of a notary and witnesses.  Why do we put this off for years?   I think it is dreading the unknown process.  But hopefully I just made that easy enough for you that you can put it on your to-do list this weekend and knock it out.  You will feel so much better that you did and your family will thank you for it!