2020 was unlike any other year we’ve ever lived through. There was a global pandemic, calls for social change, unprecedented unemployment, virtual learning, and a chaotic election. It was a year of learning, change, and growth for many but also grief and struggle. One lesson I know many people are taking with them from 2020 is the need to be prepared for the unexpected.
With such a crazy year, I know many people who struggled through the holiday season financially. They weren’t financially prepared for Christmas.
I have a question for you and it might be a bit personal – how much did you spend on Christmas 2020? Were you okay with the amount you spent? Or did you spend way more than you had planned?
Have you taken the time to add up all of the gifts, purchases, decorations, and foods you bought for Christmas 2020? If not, go grab a piece of paper and figure it out! Find the exact number (or as close to it as you can get) and take a good hard look at that number. Then ask yourself – am I happy with this amount? Was I prepared to spend this amount?
If you’re not happy with what you spent and you feel like you don’t even know how you paid for it all (or you do know how you paid for it – on credit – and you’re going to be paying it off for months), I have some news for you.
NOW is the best time to start planning for NEXT Christmas.
3 Steps to Make Sure You’re Financially Prepared for Christmas 2021!
Take the Number You Just Wrote Down and Adjust it Realistically.
So, I just asked you to find out exactly what you spent on Christmas 2020. Whether you paid for Christmas in cash or on credit, this number gives you a real hard look at exactly how much you spent. Take it in and get comfortable with it. Then, consider where you are at currently and make adjustments based on that.
If you went way over and feel buried in credit card bills, lower that number. If you’re pleasantly surprised with how much you spent and you stayed right within your budget, keep it the same or bump it up a bit.
This type of assessment, and reflection – after any major event or purchase, is really important to your realistic budget planning.
Divide by 10, 11, or 12 – You Pick!
When will you start shopping for holiday gifts and begin decorating your home? Considering this will help you to determine when you’ll need your fund built up by. If you start shopping in July, you’ll want to have a good amount in your fund after only 6 months. If you wait until after Thanksgiving to get started, you could go with 11 months.
Set up Your Christmas 2021 Sinking Fund – Either Digital or Cash Envelopes
Now that you know the numbers you’re working with, get your Christmas 2021 sinking fund set up! That way, you’ll be financially prepared for Christmas! A sinking fund is a fund that you set aside each month to go towards a specific expense, savings, or payment. In this case, that expense is Christmas 2021. To set this up, you can either use a digital budgeting app like YNAB or cash envelopes.
YNAB, aka You Need A Budget, is personal budgeting software and it’s available for Windows, Mac, and iOS. Setting up a sinking fund on YNAB is super simple. It’s just a matter of creating the fund and then specifying how much you’ll add to it each month. You’ve already done that math, so you’re set.
If digital is not your thing, you can instead use cash envelopes. Simply grab an envelope, label it Christmas 2021 and add the specific amount to that envelope each month.