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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.
Being proactive or planning ahead for Christmas shopping is such a huge relief! I used to always dread having to go Christmas shopping because I knew that meant I needed to spend money I didn’t have, but now, it doesn’t even cross my mind. I go into Christmas shopping with my mind at ease, which makes it a much more enjoyable experience.
If you’re ready for a fresh start in 2021 and you’re looking to take off on the right foot, come and join my 5 Day Family Budgeting Challenge starting next week! In the challenge, we’ll go through my 5 step process for getting a simple family budget set up that will work for you and your family. Join the 5 Day Family Budgeting Challenge right here!
Do you know what sinking funds are? If you do, great! If you don’t I’m about to get you hooked. They are LIFE CHANGING. They will have a huge impact on your budgeting and they are super simple to get started.
As someone who’s been debt free for over 7 years now, I can say that sinking funds have been a major habit that has helped our family stay on track and be prepared for unexpected expenses.
But first…
What are sinking funds
A sinking fund is a fund that you set aside each month to go towards a specific expense, savings, or payment. Primarily it’s money to allocate towards a specific savings goal. So instead of a generic savings account, these are mini saving funds with a purpose or saving with intention. There is usually a predetermined amount that is added to the sinking fund each month. Businesses can have sinking funds, but that’s not what we’re here to talk about, we’re going to be focusing on sinking funds in a family budget.
6 Sinking Funds Every Family Should Totally Have
Christmas gifts
We all know Christmas comes every year, but many people will wait until October or November to begin thinking about how they’re going to pay for those Christmas gifts. But, what if, you started preparing for that as early as January. Each month, you put a little bit of money into that Christmas sinking fund and by the time December rolls around, you’ve got the money set aside and you no longer need to stress about how to pay for the Christmas shopping.
Yearly bills
Some bills aren’t due every month, like auto insurance, yearly memberships, and homeowners insurance. Instead you might only need to pay them once a year. It’s easy to forget to set aside money to pay these bills. That’s why it’s perfect to set up a sinking fund for each of these. Simply divide the bill amount by 12 and add that amount to the fund each month. That way, when the bill comes up, you aren’t hit hard that month.
Birthday gifts
These also come up every year and we rarely think to add them into our monthly budget. Why not set up a sinking fund. That way, when a birthday does come up, you have money in the fund ready to be spent on the gift!
Holiday decorations and food
Oftentimes when we go to family parties or holiday celebrations, it’s like a potluck, we all bring something. If we’re hosting, we also have to spend on the decorations, too. The expense can sometimes be a big hit and I don’t always want it to come out of my grocery budget. Instead, I set up a sinking fund to cover those expenses when they come up.
Vacations
Create a separate sinking fund to add some money into a vacation fund. That way, when you get to the amount you need, you can pay for your vacation upfront instead of charging and then being left with bills to pay once you return.
Home and car emergencies
And you can’t forget those unexpected emergencies. Things break down all the time. Kids get injured and sick all the time. Those bills can be a major hit to your budget if you’re not prepared. That’s why it’s great to have a sinking fund set aside specifically for emergencies.
Can I set it up digitally?
Yes! It is so easy to set up your sinking funds digitally. I use an app called YNAB (You Need a Budget). It’s personal budgeting software and it’s available for Windows, Mac, and iOS. You can set up as many or as few as you’d like and you can make them as specific as you’d like. You can start with one or two, like a vacation and Christmas, and then grow from there. Setting up your sinking funds on an app is super simple.
How to set it up with cash envelopes
If digital is not your thing, you can instead use cash envelopes. Take out some cash and put it into an envelope. You can do this two different ways. The first way works like this: if you have five different sinking funds, take five envelopes, label them, and add the specific amount to that envelope each month. If you don’t want to have multiple envelopes around, you can use one envelope and track how much is in the envelope for each fund on the front of the envelope. Keep it all itemized right on the front of the envelope for convenience. This might be a bit easier than having multiple envelopes.
For more tips on setting up your budget, check out our Free Family Monthly Action Plan. This Monthly Budgeting Action Plan, offers step-by-step instructions to guide you through the exact steps you need to take to set up your own family budgeting plan.
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Struggle with staying on top of your bills and budgeting?
Do you stress out and dread when the 1st of the month rolls around?
Tired of living paycheck to paycheck?
Have constant arguments with your spouse around the family finances?
Have no clue on how to even get in control of your financial life?
Download this FREE Monthly Budgeting Action Plan, which includes Worksheets with step by step instructions on guiding you exactly on what you need to do to set up your own family budgeting plan that works for you and your family.
Struggle with staying on top of your bills and budgeting?
Do you stress out and dread when the 1st of the month rolls around?
Tired of living paycheck to paycheck?
Have constant arguments with your spouse around the family finances?
Have no clue on how to even get in control of your financial life?
Download this FREE Monthly Budgeting Action Plan, which includes Worksheets with step by step instructions on guiding you exactly on what you need to do to set up your own family budgeting plan that works for you and your family.
Do you struggle with getting your kids to clean up their room?
Are you ready for your kids to be more responsible?
Would you like your kids to be able to manage their time better?
Ready for a simple way to teach your kids good money management habits?
Download this FREE Family Chore and Money System Action Guide. It includes worksheets with step by step instructions on guiding you exactly what you need to do to set up your own chore, schedule and money management plans.
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. 
Do you know what sinking funds are? If you do, great! If you don’t I’m about to get you hooked. They are LIFE CHANGING. They will have a huge impact on your budgeting and they are super simple to get started. 
