How You Should Spend Your Christmas Money

There is no better feeling as a child or even as an adult than coming downstairs early on December 25th to open presents! As you slowly wake everyone up around you in preparation for gift giving, you are left there wondering what you might get. As you slowly grow out of your childhood, your gifts begin to come in smaller boxes and sometimes only in envelopes. These smaller and more compact gifts tend to hold an even better gift: money!

As most people can remember, the Christmas eve/morning as an adult tends to follow the same path: you wait and watch as the envelopes from loved-ones are passed around the Christmas tree and you begin to imagine what you would do with the money. Would you buy new speaker? A new phone? Nothing? As you begin to open up the envelope, taking a long moment to glance at the Christmas-themed card and take a look at the kind words that the person wrote for you, you are finally able to take a quick peek at the envelope’s content and see how much money is inside this year. Then you begin deciding what to spend the money on this year.

It is such an incredible gift to receive some money during the holidays. Now before you start spending it all on consumer goods and on things you want, I think it is important to use this money to benefit both present you and future you. Here are a few ways to make the most of the cash your parents/ grandparents/relatives might have given you this holiday!

Never Expect It

Just as a reminder, this money is a gift. It is not something that you should ever expect to receive and therefore you should not be disappointed if you do not receive it or receive a smaller amount than you were expecting. As an adult you should not expect it but appreciate it from a loved one. It is very important to never spend money that you have not received with the expectation that it will come on Christmas morning. This is just a recipe for disaster! 

Pay off your Debt

This might not seem fun and will probably be one of the last things you would want to do with the money you received from a family member but if you do receive cash this Christmas, you should definitely apply it to any debt you may currently have. By doing this, you are sacrificing the short-term gain for a long-term benefit. Although you might not feel like using this money to pay off debt, it will actually be worth more than it currently is. As an example, you receive $100 from your grandparents. Instead of buying a new videogame or piece of clothing, you take that $100 and you pay down your credit card debt. Now instead of this money only be worth $100, it is now worth $119.99 as it reduced your principal credit card debt and reduced the interest charged (usually anywhere from 19.99% to 23.99%) that you would have had to pay over the next few months as you reduce your debt. So instead of your grandparents providing a great gift of $100, they actually gave you a chance to save an extra $20 by paying off your debt this Christmas year. It’s like the gift that keeps on giving!

Buying a Necessity

If you are lucky enough to not currently have debt or your debt is in the form of a mortgage or line of credit that is fixed (and therefore an extra payment might not drastically affect the debt), than you will have a decision to make. It is always important to make sure you are able to distinguish between wants and necessities. If there is something that you need and that will make your day to day life much easier, use this Christmas money to purchase this necessity. Now this item will be different for everyone. For me, this item last year was a good quality blender as I love to make late-night milkshakes and early-morning smoothies and having to use a bad quality hand-held mixer was taking a ton of time every day and was just extremely difficult. So, I took some of my Christmas money and splurged on a nice (but reasonably priced) blender to simplify my morning routine and with the extra time saved from not having to use a hand-held mixer, I was able to be more productive at work. Again, this might not be a super exciting purchase, but I was happy to have used the money that I received as a gift to buy this item that I might not have bought if it was up to me. From a useful household item to buying an activity that will get you outside of the house (not during the pandemic of course), consider a practical and fun approach to using up this money. But remember, this money does not need to be spent but rather should be used properly!

Save and Invest

Like I have said time and time again, you never truly know when your next emergency will occur! That is why I think it is so important to make sure you have a strong emergency fund just in case something happens. If you have already built up a savings and/or an emergency fund and you already have everything you need, then you should invest this money. As the saying goes, you need money to make money. If you are in a fortunate position where all of your costs are being paid off completely every month and you do not have any high-interest debt, than it is always a great idea to invest any extra money that you may have so that it can begin to compound over time. Investing is an easy way to begin growing your Christmas money.

Whatever you decide to use your Christmas money on, always remember to do your research and make sure that you are stretching every single dollar so that you maximize your benefit and minimize your cost. Trust me, there are always coupons available and there is no reason to spend more money than you have to on the same product. Christmas money is a gift and should be used in a way that helps you move forward towards a better financial position than you are currently in.

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