Editor’s Note: Inspired by this article, several Credit.com staffers are tracking their own personal spending freeze on social media. You can follow their progress as they stop spending and start preparing for the holidays using the hashtag #spendingfreezeon Facebook and Twitter.
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We’re all aware that “the most wonderful time of the year” is also typically the spendiest. And it’s followed up by a somber January, when the even-more-enormous-than-you-feared credit card bills come in. But what if you could enjoy the holidays without fear of the January hangover? It might not be impossible. Most of October and November may be a good time to make a big push for saving as much as you’ll spend, reversing the regrettable habit of spending first and paying later. (And no guilt over spending a bit for Halloween or Thanksgiving. By then, you likely will have saved enough and/or developed a knack for being resourceful.)
How do you start? We asked Lee Silber, author of “Money Management for the Creative Person.” He didn’t come by money skills naturally, as some people seem to. He once had to check under seats, in ashtrays, the glove compartment and armrests for change because his credit card was declined at a gas station. (He had only one credit card at the time, because he thought it would make keeping track of what he spent easier. In reality, if it had been lost or stolen, it would have left him without a way to pay without cash, and its limit was his total available credit. And getting anywhere near his credit limit — Silber’s card was maxed out — can damage credit scores.)
He never forgot the humiliation of going into the gas station with the change he managed to find, a lot of it pennies. “I knew, ‘I have hit rock-bottom,'” he says. Garage sales and the like helped give him a little financial breathing room, but they were not a long-term solution.
In 2007, five years after his money management book was published, he was experiencing what he calls “lean times” while transitioning to full-time writing. His income was not steady, but many of his expenses were. And he didn’t really know exactly what his basic costs were, because he didn’t consciously differentiate between wants and needs. Creative people often don’t, he said. They’re great with ideas and the big picture he said, but details such as budgets are not their strong suit. For a full month, Silber sent every expenditure through the “Do I really need it?” filter.
A Great Adventure
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The result? A sometimes unconventional diet, based on what happened to be in the pantry, freezer or refrigerator (he describes the peanut butter and chocolate-chip sandwich he made when he was out of jelly as “awesome”) and he learned that some of his “needs” were really “wants” cloaked in a lack of resourcefulness. Did he need to call a repair person? Not if he could find do-it-yourself instructions or a YouTube tutorial. Even when the expense was small, he looked for alternatives to spending. “When I ran out of note paper, I went through old files and found papers that were from the Bush presidency — the first Bush in office,” he said. “The key is how you approach the freeze. If you look at it as a big adventure it’s a lot more enjoyable than a monthlong trek through the desert without water.”
He suggests looking at a spending freeze as a time to figure out “how we can do what we want and spend less money.” A spending freeze is most easily done if you can get everyone in the household on board. Silber says a freeze doesn’t have to be all-or-nothing to work. He suggests offering small rewards, particularly when children are involved. Rewarding yourselves with ice cream for a week of careful spending shouldn’t wipe out all the savings. And a month without movies, roller skating or other small pleasures may feel very restrictive to youngsters.)
Before he started his spending freeze, Silber spent as he would normally. He just wrote it down, without judgment. The judgment came when he was looking for spending that could easily be cut. He discovered he was spending a whopping $60 per day on things that he arguably did not need or did not need to spend so much on. That caught his attention. But was the money really “wasted”? Silber thinks he was overspending, but he’s honest enough to say there were things he missed when he cut the budget to the bone. Going out for sandwiches or coffee was a big one. Because although he could prepare similar food at home, the experience wasn’t the same. And he missed the experience. But during the month of no unnecessary spending, Silber was dealing only in cash. And parting with dollar bills felt a lot more real to him than signing a charge slip. He and his wife brown-bagged it or ate at home.
Thoughts That Count
The spending freeze also made him more aware of what can seem like a cash exchange going on during the holidays. (Ever seen people exchange cards containing gift cards? I have. And wondered if they should have just traded $50 bills instead. Or whether somebody just swapped a $50 card for a $20 card and now feels undervalued.)
Not only did Silber want to skip the malls, the spending and the guessing what would please someone, he wanted to find a more meaningful gift. In 2007, he wrote letters to the people on his list, “about what I thought made them awesome.” Many still carry those letters. “The cost was time,” he said, “and I was willing to spend the time.” Another way he’s tried to convey thoughtfulness: wishing friends a happy “half-birthday.” (Many didn’t know they were having one and were extra-pleased to know someone was thinking of them).
Another idea: picking out gifts that seem perfect for the recipient. They need not be expensive, but they do need to show that you know the recipient well and value the relationship. It doesn’t have to be a coupon book of promises to wash the car and change the litter box that somehow never gets redeemed.
Silber spends a bit more freely now, but he says the spending freeze changed how he looks at money — it’s a limited resource. He’s more careful, and he wants to get the maximum benefit from it. He asks for discounts, waits for sales and often vacations in the off-season.
If you’re looking for a less-extreme way to save for the holidays, he has five suggestions:
- First, know where your money is going. In other words, track your spending. It’s eye-opening, he said. “And ignorance is definitely not bliss.”
- Differentiate between wants and needs. (But understand that one person’s want may be another’s need. And one person’s need — fitness class, for example — might not be on someone else’s radar. Your list will be unique.)
- Try to get the most you can for the least amount of money. Spend wisely.
- Have a goal. (“I will spend less than X dollars a day for wants.”) Silber says he now spends about $20. That’s up from the $11 a day right after spending freeze, but far below pre-freeze levels.)
- Reward yourself for success. If your only reward is knowing you’ll have more to spend for the holidays, and that’s enough to keep you motivated, that’s fine. If, on the other hand, you’ve really missed your lattes, go ahead and indulge as a reward for all those days when you didn’t.
While developing a budget and keeping your spending in check is important, keep in mind that debt can also eat away at your funds, especially if it carries higher interest rates (like credit card debt). Building a get out of debt plan into your budget can help save you more over the longer term, and paying down your credit card debt can help build your credit. A higher score can also help you get lower interest rates on loans, which will save you money over time, too. You can pull your credit scores for free on Credit.com to see how your debt is affecting your credit, and to get a plan to help you get better credit.
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Gerri Detweiler is Credit.com's Director of Consumer Education. She focuses on helping people understand their credit and debt, and writes about those issues, as well as financial legislation, budgeting, debt recovery and savings strategies. She is also the co-author of Debt Collection Answers: How to Use Debt Collection Laws to Protect Your Rights, and Reduce Stress: Real-Life Solutions for Solving Your Credit Crisis as well as host of TalkCreditRadio.com. More by Gerri Detweiler