If you celebrate Christmas and are obsessed with it like I am, you’ve come to the right place.
It’s the most wonderful time of the year (for people who enjoy buying gifts and have the means to purchase them). It’s also one of the most expensive times of the year. In order to shower our loved ones in gifts, we end up dropping hundreds of dollars each holiday season. We are also bombarded by “holiday savings” campaigns such as Black Friday and Cyber Monday. If you’re like me, spending a ton of money on gifts when you aren’t totally prepared is a bit stressful. This year, I wanted to make it easier on myself. I wanted to find a way to not leave the holiday season feeling like all my money had disappeared.
How can you budget for Christmas spending in advance?
There are a few ways that you can do this, but my favorite is the sinking fund. Sinking funds are a short-term savings fund that you eventually deplete and then build back up again. They can be kept anywhere that is easily accessible. If you enjoy using cash, you can build up a cash fund and collect it until it reaches your desired amount. I prefer to deal with all of my money online. If you’re more like me, you can create a separate high yield savings account or regular savings account and transfer your desired amounts to it. Then, when you’re ready to spend the fund, you can move your money wherever you need it to go!
Here’s a bonus tip! If you use credit cards and receive cashback, you could also collect your cash back throughout the year and use it to help supplement your Christmas sinking fund! I did this throughout 2022, and by the time I start making purchases, I’ll have about $150 in cash back.
Okay, cool. So how do I make sure I have enough in the sinking fund for Christmas gifts?
This part is really all up to you! I operate using the 50/30/20 rule, so 20% of every paycheck I make immediately goes to my savings goals at the moment. I’ve noticed that if I start saving early for any given goal, I can save in smaller increments over longer periods of time. This allows me to focus on my larger goals more, which is what I prefer at this stage in my journey.
All you really have to do is some quick math. If you get paid $1000 per paycheck, 20% of your income would be $200. Maybe out of this $200, you decide that each week of the year, you’ll contribute $20 to your Christmas sinking fund. The holiday shopping season begins whenever you decide that it does, but I usually start shopping around Thanksgiving for gifts. This would mean that I have saved $20 biweekly for the past 47 weeks (Thanksgiving occurs in the 47th week of the year in 2022). By that math, I will have saved about $470 toward my Christmas sinking fund.
Depending on how many people you’d like to buy gifts for, and how much you’re willing to spend on them, you can adjust this amount. For instance, you could contribute $5 or $10 to the fund with each paycheck instead. You could also put a cap at the fund. Maybe you decide you really only need $400 in the fund. You could contribute $20 per week until the fund hits $400, and then decide to put your money elsewhere.
So, there you have it!
These are a couple ways that you can save up to buy everyone you love a Christmas gift ahead of time. It makes for a much smoother and peaceful holiday season, and I am so glad that I decided to implement it early in my financial journey. Want to see more tips and tricks just like this? Subscribe to my mailing list! You can also follow me on Instagram, Facebook, and TikTok for more content! Now, it’s time to put up my Christmas tree.