How to Avoid Christmas Debt with Sinking Funds

Sticking to a savings plan during the year can help you eliminate Christmas debt. Learn how to avoid Christmas debt with sinking funds.

Christmas can be so overwhelming! There, I said it.

So many people think it, but who admits it?

Parties, friends, gifts, get-togethers, dinner, celebrating, traveling, brunch, shopping, decorating, teacher’s gifts. The list can go on and on and on….

And then you have to think about the money associated with all of the festivities.

Oh. My. Word.

No wonder why so many people just put it on the charge card and wake up in January and spend the rest of the year digging out of that debt.

No one wants to go in debt over the holidays. But so many people do it every year!

Be sure to pin this on Pinterest

Do you go in debt every Christmas? Stop going broke during the holidays and stick with a plan that works! How to avoid Christmas debt with Sinking Funds #christmas #budget #debt #gifts


(This post may contain affiliate links. For more information, please see my disclosure.)

You know that feeling, Christmas is coming again (same time every year!) and you have not budgeted one penny for it. How are you going to pay for it again this year? Not pay the bills for a month? Put it on the credit card again? Many people go into debt every year during the Christmas season because of poor planning.

What if you could make that feeling go away next year? Go away forever…No more Christmas debt. No more struggling through the holiday season ever again.

Imagine planning in advance for the holidays? Not only planning, but following through and not one bit of regret in January?

Imagine paying for all of your gifts, decorations and food, even travel and not going into debt every year? Give yourself the gift of no more holiday debt. Put a shiny red bow on that! Best gift ever.

How to avoid Christmas debt with sinking funds


All it takes is a little planning throughout the whole year. Not just in November and December mind you, but all year long!

Setting up a sinking fund for Christmas expenses is your answer!

What is a Sinking Fund? 

A sinking fund (or targeted savings account) is an account into which you periodically set aside money for expected expenses.

You can count on these expenses every year. Christmas pops up every year at the same time, it is not a surprise! Same with birthdays, car insurance, Amazon Prime, etc. You know that you will have to pay for them, so why not make it easy on yourself and split that cost into monthly increments or smaller bits that you can save with ease.

Remember the Christmas Club account that your Mom or Grandma had at the bank way back when? Anyone could open a new savings account specifically for Christmas and you could not withdraw that money before a certain date in November or you would pay a penalty. Building a Christmas sinking fund is the same thing, except you have to keep yourself accountable. Your penalty could be more debt in January if you do not stick to the plan.

Stop cramming Christmas savings into the 90 days before Christmas. If you have a plan and save towards your goal all year long, you won’t feel stressed and broke and you will actually be able to enjoy the holidays every year.

So how does a Christmas Sinking Fund work? 

The first step is to figure out how much you usually spend on Christmas. What goes into your Christmas budget? Just presents, or do you add in all of the tree trimmings and food into your Christmas budget? Travel? Make a list and an approximate amount for each and total it up. That is how much you will want in your Christmas sinking fund every year.  

Say you spend $1200 per year on all things Christmas related. Now you know that you need to save $1200 every year so that you do not go into debt. Break that $1200 down, that’s $100 per month that you have to put away into your Christmas sinking fund. Divide it by pay period, or weekly. Whatever is easiest for you. Then stick to the plan and start saving that money. Schedule those transfers, take cash out, whatever will work for you.

Just start doing it now! You will be so thankful later.

You can add it to your regular savings account or open a separate savings account. I have many different savings accounts with Capital One.  That money is not readily available for me, it takes a few days to transfer to my brick and mortar bank. Another way for accountability!

Next time the holiday season rolls around, you will be financially prepared.  

No more struggling to get through December eating rice and beans.

No more huge credit card bills in the new year. Say goodbye to Christmas debt for good!

Do you go in debt every Christmas? Stop going broke during the holidays and stick with a plan that works! How to avoid Christmas debt with Sinking Funds #christmas #budget #debt #gifts


Be sure to download my FREE spreadsheet so you can keep track of the balances for all of your sinking funds. Trust me, once you set one sinking fund up, you will want to set them up for all of your expenses, like birthdays, vacation, vehicle insurance/expenses, and much more. 



Related Posts:

Sinking funds

Pay off debt with snowball method

How to get out of debt when you are broke



Leave a Reply

Your email address will not be published. Required fields are marked *