In my opinion, you should be. How much did you spend this year, including travel, gifts, decorations, and food? Add it all up. What was your total Christmas bill for 2021? This question isn’t meant to shame or guilt or any of those things, but the point is that you can start now in January budgeting the right amount into your Christmas fund for later this year. Christmas is a great time to celebrate and be with family and friends, but it should not break the bank or be a surprise – it’s December 25th every year.
So how do you approach this sinking fund strategy for Christmas to make it less stressful.
Let’s say you spent $500 on holidays this year, and assume you want to spend about the same next year. That’s a line item on your monthly budget for $42 labeled “Christmas Fund”. $500 ÷ 12 = $41.67 ($42).
Let’s say you need to travel, and maybe you have a larger family, and you want to budget $2000. Yep, you guessed it, that’s $2000 ÷ 12 = $166.67 ($167).
Let’s illustrate what this means for two families' Christmas budgets. Let’s assume both families are planning $600 for Christmas, a nice round $50 a month if you spread it out. Family # 1 is going to budget a little every month. Family # 2 is going to budget for Christmas in November and December.
According to my experience assisting clients with budgeting, Family # 1 is less likely to utilize a credit card or dip into savings around the holiday season.