How to Start Saving Again after Holidays

The holidays undoubtedly hit you hard, perhaps even harder than you believed initially, right square in the wallet.

The projected per person shopping list was expected to reach nearly $1,000 in 2017, up from last year’s $929.^[1]

Although that amount difference might seem modest by comparison, you’re still seeing an increase, for one, and coupled with another cold, hard fact that the majority of individuals and families forget about once the holiday shopping season is upon us, only to rear its ugly head after the long lines and retail dust settles.

You’ve depleted what is left in your savings account, or you’ve spent most of your holiday “cash” by using credit cards, instead.

The average buyer in 2016 spent just over $1,000 on their credit cards (roughly $1,003), again up from 2015.^[2]

Whether you dipped into your savings account or used as much plastic as you could get your hand’s on, you still have plenty of post-holiday work to do, from implementing a plan to save and add to what once was your savings account or start paying down credit card bills as soon as possible.

The other staggering fact that can’t be overlooked is the average amount a person has in their savings account: about 62 percent of the United States population has $1,000 or less in their savings account.^[3]

You don’t have to be a mathematician to figure out that if you’re spending, on average, $1,000 of your own money on gifts, and the majority of individuals and families only have $1,000 lying around, coupled with the additional debt, the holidays were joyous and jolly but have quickly turned into a lesson in budgeting and savings plans once the decorations come down and decision time on how to start saving again arrive.

The silver lining isn’t the leftover tinsel, however, as you actually can recover quite nicely from that spending hangover and get back on track with a few easy money moves that truthfully anyone can use to start the post-holiday pendulum of saving pushing back in your favor.

Here’s how:

Bonus Pointers: Raises and annual bonuses make great starting points

So you’re savings account, also known as an emergency fund, isn’t looking so good, but the calvary is coming in the form of a two-fold increase in your income: year-end bonus and an annual raise.

If you’re someone who gets both of these, you’re almost assuredly in a better place right away as far as holiday debt and money you’ve spent during the gift-giving period.

Year-end bonuses are often given right around the time when your company is calculating their year-end profitability, so that means you could see a bonus in February, for example.

Resisting the urge to splurge, why not take a more fiscal and responsible approach to that money and reinvest it into your savings account or pay off debt with it.

Again, this is hardly a fun way to enjoy your hard-earned money but if you’re overdone it during the holidays, this makes the most financial sense of all.

Think of it this way: the average U.S. household has about $16,000 worth of credit card debt.{http://time.com/money/4607838/household-credit-card-debt/">[4]

So, if you’re already managing debt and only added to it for the holidays and depleted what money you had saved, the bonus being distributed to your savings account is hard to argue.

Sure, you might not be addressing debt right away but you also have that security blanket of dollars tucked away for that “rainy day” when you need to make home repairs or fix your vehicle. If that money went to toys, video games, and Black Friday or Cyber Monday spending, like your mom or dad would say, put it back where you found it: in this case, it’s money in your savings account.

Financial experts, in general, agree that a bonus is best used at a 90-10 ratio, meaning that you should use about 90 percent of it for the aforementioned, get back on track holiday savings plan and the rest on having “fun” with it.^[5]

Divide and Conquer: Pay down debt with interest rates in mind

Paying on your debt is important, more than some believe as far as how it affects your credit report and overall standing.

If you pay on time, that accounts for 35 percent off your credit score.^[6]

So if you’re not able to pay your credit cards off in one fell swoop after your use them, you can at least continue to keep your credit score at a respectable number.

But really the key to post-holiday debt and managing it is to pay it off within 30 days; realistically, you’ll want to use a method that is tried and true: pay as much as you can and focus on the credit cards with the higher interest rates first.

Once those cards are paid off, go ahead and take whatever it was you were paying on the card with the highest interest rate and allot that to the next highest card. The hope is that the average consumer didn’t use multiple cards during the holidays, but if that was the case, this is by far the best approach.

This way of looking at debt actually is going to get you from Point A (debt) to Point B (debt paid off) much faster, roughly 15 percent quicker than if you just had equal payments to each card, versus focusing on one card to the next.^[7]

Back to Basics: Reinvest in the following budget again

No one really rallies behind budgeting to the point where you embrace it totally.

That, however, can’t be your attitude toward budgeting right after the holiday shopping has subsided.

You need to embrace having a budget and most importantly using it, but not to the point where it’s unreasonable. Most budgets go off track quickly when they’re ridiculously strict. So even if you spent far too much during the holidays, you still can’t budget without any spending in mind.

Much the same way rigid diets often lead to overeating, budgeting with those same parameters only end up leading to one stray Saturday where you overspend and find yourself right back in the same financial, post-holiday peril you originally were trying to topple.

Again, budgeting, the main purpose of it, is to save, so with that in mind the best thing you can do after the holidays is come up with an expenses-versus-income layout and do one thing before anything else: pay yourself first.

The idea behind saving should be automated, so roughly you should take what you earn and put 15 percent of that in a savings account, post-holiday, and then dole the rest out for expenses, 85 percent.^[8]

If you’re someone, like most, who really wants to simplify budgeting to the point that there are no shades of gray as far as what you can spend on yourself versus necessities and credit card debt (undoubtedly added during the holidays), you might want to use the 50-30-20 rule of budgeting, an effective, rudimentary way to look at budgeting and saving with a broad brush.

Simply put, the 50-30-20 rule allows 50 percent off your after-tax spending to necessities, leaving 30 percent for “wants” and the final 20 percent for savings and debt.^[9]

Now, you can always adjust this accordingly if you want, but leave the 50 percent alone; you shouldn’t take from that and make it 30 or 40 percent to add to the other line items. If anything, the 30 percent for “wants” is the one you should look to manipulate first, taking away from that column and adding more to paying off debt and saving more money.

Income Sensitive: Pick up extra hours or part-time work

Retailers tend to start scaling back on seasonal employment after the holidays, so the idea of getting part-time employment might seem a little more challenging, but that is typical for the retail sector.

Despite the fact that stores are going to start sending seasonal help packing, you still have plenty of other options to earn more money, without necessarily adding too much to your already steady workload that you make this proposition totally unmanageable.

One area that tends to see an uptick after the holidays is the restaurant business, mostly due to gift cards that were given as gifts being used and the idea of spending one more second cooking or being in the kitchen.

Now, restaurants see a huge decline during Thanksgiving and Christmas, roughly down 27 percent and as much as 45 percent in that time period.^[10]

But that changes as the new year approaches, and ironically starts with an uptick on New Year’s Eve, so if you’re in the market for a part-time job, consider waiting tables, and start with the busiest night of the year. The average wage for a waiter or waitress is just under $10 per hour (around $9.25), and this job usually comes with hours that can be done outside of a normal 9-5 routine.^[11]

If there is one side job that stands out after the holidays, and one that pays nearly $20 per hour, it would be work as a tutor or an SAT prep instructor. If you’re proficient in a topic or area of concentration or study, think long and hard about this one. Not only does the job pay well, but it’s all about making money based on timing. Kids are back to school after the holidays, and parents realize the end of the year is fast approaching: for high school kids it’s all about the SAT’s, and everyone else finishing the year with better grades (that final year-end push is on).

Some tutors earn as much as $85 per hour, while SAT or standardized test instructor is more than $20 and often times over $30.^[12]

Often times, budgeting and putting yourself on a spending restrictions isn’t the most fun task on your “to do” list, as shopping and spending is simply fun and anyone would admit to getting caught up in the hoopla of the holidays, thus leading to spending money you don’t have or what little you actually do.

An interesting statistic coming out of the 2017 holiday season is that the younger population, ages 18-34 are going to do the most spending of any age group, because their income is more disposable (i.e. fewer bills, responsibility financially). They’re expected to account for 54 percent of holiday spending.^[13]

While that statistic might be more hopeful, consider that 39 percent of the next closest age group, from that same projection above, plans to spend more (ages 25-34). That is alarming in the sense that age group is more financial strapped as most are getting married, starting families, buying their first home and other responsibilities that can get sidetracked with holiday spending being out of control.

The idea of going overboard can’t be changed if that has already transpired, but that doesn’t mean the rest of 2018 has to consist of feeling guilty or bad about your purchases. Instead, use it as an opportunity to earn back what you spent, pay off what wasn’t your money and actually start accumulating even more in that would be savings account.

Doing so not only is going to give you that proverbial financial breathing room but also prepare you more than you know for next year’s holidays, because it’s never too soon to start thinking and most importantly saving, for that.