There are many things that I love about the Christmas season. I love the meaning, traditions, decorations, time with family, time with Jesus, singing carols, the movies, and the giving and receiving of gifts. I do not love holiday stress, busyness, and money worries. Last year was our first year on the Dave Ramsey plan, and we were newly debt free. We budgeted for Christmas presents and used only cash and debit and it was so freeing. We loved it so much that we did it again this year.

We budget how much we want to spend on each other, our families, charity, and our friends, and then we pull the cash out each month and keep it in our gift envelope. Christmas comes every year and is not an emergency, so we want to make sure we are prepared so that we can be generous with our gifts. We pull out gift money through out the year to cover wedding and birthday gifts, and starting in September we add to the amount significantly to cover our Christmas gifts. Because we pull out money in September, October, and November, we didn’t have to take out much in December at all. We take our budgeted amount out of the envelope and use it to buy the gifts. If we buy something online with the debit card, we put that amount back into the bank. It feels so good to have the money to buy each other and our loved ones gifts without any stress.
We don’t have to worry about the credit card bill showing up in January reminding us of our mistakes. We have no money stress about Christmas. We remember the weight of credit card debt and never want to feel it again. Many of our friends and family have asked us why we would want to miss out on the airlines miles or rewards that come with many credit cards. We’ve heard from lots of people that they use credit cards because of those rewards. To us they just aren’t worth it. Credit card companies offer rewards so that folks will spend more, and studies show that is exactly what’s happening. We are completely convinced that no one beats the credit card companies. They always win. They make so much money off of the debt people incur to get some miles that I would rather not help them. Many friends claim to pay their bills off every month, and while I want to believe them, statistics show that it can’t be true all the time. You get behind one month or are late with one payment, and you’ve lost all the reward money you earned. We’ll pass on that. We have too tragic a history with credit cards and both of us have made HUGE mistakes in the past. Kudos to you if you can beat the system, but it isn’t for us. What’s in our wallet? Cash, baby.
Here’s some great info from Time magazine online on credit cards and their reward systems:

On the surface, it would seem like credit card issuers are foolishly giving away money with cash-reward cards, and that a cardholder getting 1% or 2% back is reaping in easy money. The reality is much different. Simply put, the study says:
The main objective of the card companies is to increase card spending that may result in cardholder’s debt in the future.
And based on the figures, the card companies achieve wild success in this objective. More spending. More debt. But hey, you get those occasional $50 cash-back checks in the mail! At least, that is, if you remember to keep track of your rewards and order the check—because these programs typically don’t give you cash back automatically.

For the consumer, getting cash back is of course better than getting nothing—but only if you don’t increase your overall spending due to the perverse incentives inherent in cash-back cards. Spending a dollar to get a penny back doesn’t make sense.
But what if you were spending the dollar anyway? Then it seems silly to not get the penny-per-dollar reward. The problem is that it’s all too easy for consumers to justify extra spending with credit cards. Studies show that you’re likely to spend 12% to 18% more with a card compared to cash. And when you’re vaguely aware that every item you pick up shopping gives you a little more cash back, well, then you’re even more likely to place more stuff in your shopping cart.

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How do you budget for Christmas?

3 Comments on Frugal Friday – Our 2nd Cash Only Christmas

  1. We’ve only ever paid cash and used our debit card. In fact, we dont own a credit card!(I know, some would say you should have at least one but we choose not to).
    We’re also mainly a one income family of 4 here so things get tight…esp at Christmas time. But like you, we set a limit for each person. This year in particular I wanted to be very intentional about getting(or making) well thought out gifts. Not just getting something to get something(know what I mean?) That can be tough on a tight budget but we did it and I think it was the best Christmas yet(as far as our gift giving went).
    I do agree with you that setting aside a bit each month leading up to December is a great idea. I know my mom does that with her bank. Its a Christmas Club type thing. Each month she deposits so much and then cant touch it until its time for Christmas.
    Shopping throughout the year as you find sales also helps!
    Im so proud of you gusy for being debt-free. We’re working on that. Although we have no credit card debt and no car payments(we’ve always driven used cars and love not paying a car payment!) we both have student loan debts we’re chipping away at.
    Doesnt help that our dishwasher broke right before we left for Disney(Thanksgiving) and the day before Christmas we had to buy a new kitchen sink faucet and printer. Then yesterday my dryer died! When it rains it pours:(

  2. We’ve never had a credit card. We’re looking into getting one this year in order to generate some credit history, but we’ll have to investigate more to weigh the pros and cons.

    As of now, everything’s paid for in cash or debit card and we’ve never been in any sort of debt. We’re excited because in January we’ll be able to save some money for the first time! Time to open up a savings account.

    We budgeted a certain amount for each family member, spending $415 on gifts (between $30 and $50 per immediate family member on both sides). We’re hoping to have a little more to spend next year, but everyone got something they had asked for.

    My sister saved tons of money by making everyone’s presents… she’s a very talented painter, sewer and photographer. Interesting that her gifts were probably the favorites this year!

    Jorge and I didn’t get eachother anything this year because things were pretty tight (especially with me paying for a trip back to the US). Oh well, maybe next year!

    I’m glad you guys are debt free 🙂

  3. I’m one of those people who say “but I might as well get the airline miles.” I would say 98% of the time i’ve owned a credit card I’ve paid it off in full…but I know I spend more than I would if I was using cash. My hubby and I are fortunate that we haven’t ever had credit card debt, but we do have school loans and are trying to be diligent with our money. For christmas we set a budget for how much we could spend on each other.

    happy new year to you!!

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