By Kathleen O'Malley, Creator, Frugal Portland
Christmas shopping. How does something so predictable hit us over the head, year after year? How is it that every time Thanksgiving rolls around, we’re suddenly hit with the reality of a diminished bank account and a long list of people we love?
Well, not anymore. At least not for me. Not this year. No way. I figured out a way to trick myself into having an “extra” $500 in the month of December.
Want to know how I did it?
It’s so easy, you can do it too. If you follow my steps, this December, you’ll have $500 extra in your account, too! Your kids will be so pleased.
How to Trick Yourself: Start in January
Step 1: Open an IRA.
First, you’ll want to open an IRA, if you don’t already have one. My preference is for a Traditional IRA, though you can explore the pluses and minuses of a Roth if you so choose. Think of it as “tax now” or “tax later” and choose accordingly. Unless you make enough money to exclude yourself from a Traditional IRA (which you can find out easily), then your only option is a Roth.
Step 2: Set up Auto Pay.
You definitely want to max out your IRA, which means $5,500 this year. Every financial investment house allows you to pay X dollars each month. Put $500 a month toward your IRA.
Step 3: Do the Math
If the maximum contribution for the calendar year is $5,500, and you’re diligently socking away $500 a month, the math is easy. You’ll max out in November! Perfect timing. Now, when your paycheck comes in December, you’ll know that you have an “extra” $500 to put toward your holidays!
Step 4: Shop Selectively
Now that you have the money, you can be generous. Think of non-traditional ways to show your family and friends that you love them. Remember, people don’t need extra “stuff” – especially if it’s stuff they keep around so they don’t end up hurting your feelings!
This year is the first year I’m able to do this, and let me tell you, it already makes a difference. Sure, I’m “one of those” who are shopping early this year, but I know I’m not overextending myself. The money will be there in December, and I won’t have to worry about it.
The Psychology of Saving
For years, I could never save $5,500 toward my retirement. “Who are these Scrooge McDuck guys with all this extra money?” I’d think, scratching my head. “How will I ever retire?”
But if you save, and more importantly, if you hide your savings somewhere your grubby little “I need a new pair of shoes” hands can’t get to it, then you adjust. Humans adjust to a myriad of situations. You get used to living with less.
And you paid your future self handsomely in the meantime.
Happy early holiday season!
Kathleen O'Malley is the creator of the personal finance and frugal living blog, Frugal Portland, where she writes about fun, frugal things to do in her hometown of Portland, Oregon as well as ways to make the most of our short time here on the planet. Topics include living simply and having fun on a shoestring.