SEASONAL SPENDING: The "Giving" Account

When people budget, if they budget, they generally think about their expenses on a monthly basis- rent, transportation, food, cable, insurance payments, etc.  What they often fail to do is take a step back and consider major annual events that change spending in certain months or times of year.  The best example is the winter holidays.  Sure, you can just charge all your holiday expenditures on credit, but do you really want to spend the first weeks and months of the New Year paying off a couple frantic days of shopping in December? 

What I’ve done in the past few years is set aside 5% of my paycheck in a separate account for “giving.”  That 5% applies to every paycheck I receive.  While I pull from this 5% throughout the year on birthdays, Mother’s Day, Father’s Day, etc- I know that come December there needs to be enough to account for all of my holiday shopping.  Around Thanksgiving I can take stock of how much is left in my “giving” account and budget my gifts appropriately.  Some years are better than others and that’s ok.  Some times you have to opt out of a workplace “Secret Santa” to get your parents that something special for Christmas.  But if you’ve been saving all year with the big holiday in mind, you’ll know exactly where you stand come December.

As with savings accounts and retirement accounts it may be easier to set up a separate “giving” account at your bank and have that 5% automatically deducted from each paycheck and put into the account.  The less you have to deal with the money, the less likely you are to spend it prematurely.

Now if you’re truly feeling broke, feel free to adjust the percentage as needed.  Contribute 1% or 2% of each paycheck and spend the rest paying down your debt or building up that emergency fund.  No matter how dire the situation, I encourage you to put down SOMETHING, just so when the time comes, you’re not racking up more high interest debt on another credit card.  Your spending limit is strictly set by what’s in the “giving” account.

While you shouldn’t spend a penny more than what you’ve saved in the “giving” account, feel free to spend less.  Use the extra money to contribute to your 401k or make an early payment on your mortgage.  Also consider events at the start of the coming year.  If you clear out everything in December, there won’t be much to give in January.  Lastly, “giving” doesn’t only apply to your nearest and dearest.  Charitable giving and donations also come out of this account; so if you’ve had a good year, maybe share some of the excess with those in need.

Happy Giving!