January already I hear you say…… Christmas has come and gone and the aftermath of a busy and expensive time is now being digested.
So the purpose of this blog, to provide some insight about how to plan and prepare for Christmas and other expensive times of the year, such as birthdays, wedding gifts, milestone birthdays and the like.
I spend much of my time discussing cash flow with people who we work with across all stages of life and one of the consistencies is that the generosity of giving comes at a cost and for many presents a challenge to cater for. It consistently surprises me how much gifts cost not only in my household but everyone’s household and it is not surprising that it is arguably the most expensive item for every household.
So, how do you overcome this challenge?
The answer is simple, a gift account! A gift account is simply a normal bank account, ideally a high interest account, that you add money into on a weekly or monthly basis. The outcome, a little pot of gold to draw on as and when you feel like being generous.
Open a new bank account with your bank and make sure it is a high interest earning account;
Spend a couple of hours figuring out how much you would normally spend on gifts, such as, birthday presents, milestone gifts and Christmas. Once you have an approximate, add 10% to the amount. For example, birthday presents $1,500 per annum, milestone gifts $1,000 per annum and Christmas $2,000 per annum. Total gift allocation, $4,500 + $450 (10% buffer) = $4,950 per annum;
Start by adding into the gift account every month. To continue the example above, this would require a saving of $412.50 per month;
As and when the gift expense arises, draw from your gift account; and
Review at the end of 12 months how much you actually spent and then refine for the following year.
I am sure you are all thinking that this sounds like a very simple and common-sense approach, well yes, it is, however something like this is rarely used and hence issues arise. One of my favorite nerd quotes is, “Failing to Plan, is, Planning to Fail” and given the gift expense is likely to be your biggest expense, planning I feel will be a sensible pathway.
Above all else, if you are stuck or uncertain about how to do this, please speak to us about how we can help you with the above. I have no doubt you will feel more in control of your finances in implementing a gift account, so please give it a shot and you may be pleasantly surprised with the outcome……