WASHINGTON, DC (7/29/14)--Pondering Christmas in July is a good idea if it gets you saving.
The average American spends $800 on holiday-related expenses every year, according to the National Foundation for Credit Counseling (NFCC), Washington, D.C. Despite the significant outlay, many consumers forget to plan for these annual costs and instead charge them to credit card.
If you charge $1,000 and pay only the minimum 2% balance, at an 18% annual percentage rate it will take you 12 years to pay it off. And by the time you do you will have spent $2,353. Now imagine if you have to do this every year.
The NFCC offers a better alternative--spend the next five months planning for the holidays. Here are five ways to save $1,000:
Tighten your everyday spending with the goal of saving about $1 a day between now and Dec. 25. This could easily net you $150.
Adjust your W-4 to accurately reflect what you owe in taxes. The average tax return is $3,000, but that money doesn't arrive until April. By taking less out of each paycheck, you can save that money for the holidays.
Cut back on monthly expenses that aren't fixed. Aim to spend $10 less every month on categories like gas, food, and entertainment.
Sell unused items. Sell clothes at consignment shops, books, utilities, and CDs online at sites such as Amazon, or have a garage sale.
Open a holiday savings account. Don't use existing accounts because you could too easily spend that money on other items.
"If you're still paying for holiday spending 2013, consider rethinking your gift giving for this year," said Gail Cunningham, spokesperson for the NFCC. "It makes no financial sense to pile new debt on top of old. Kindness and experiences are meaningful substitutes for purchased gifts, and are remembered long after the wrapping paper and bows have been discarded."
For related information, read "Practical Ways to Save Money" and "Shop and Save in Every Season" in the Home & Family Finance Resource Center