When it comes to holiday spending, many of us find ourselves in a familiar pattern: scrambling to cover expenses, relying on credit cards, and feeling stressed when the bills arrive in January. But it doesn’t have to be that way! A sinking fund—a dedicated savings plan for specific expenses—can transform your holiday season.
With a little planning, you can make holiday spending predictable and stress-free. Here’s why you need a Holiday Sinking Fund and how to start one in 2025.
Unlike surprise expenses, holiday spending is entirely predictable. Christmas and other holidays occur at the same time every year, so there’s no excuse not to plan for them. By setting up a sinking fund, you can spread out the financial impact over the entire year, leaving you prepared when the season arrives.
The holidays should be a time for joy, not financial regret. Many people overspend during this season, relying on credit cards or depleting their savings. By having a dedicated fund, you can shop with confidence, knowing the money is already set aside. No more post-holiday guilt or anxiety when reviewing your bank or credit card statements.
Giving gifts is a beautiful way to show love and appreciation, but it shouldn’t come at the expense of your financial well-being. A sinking fund allows you to be generous responsibly. You can celebrate the holidays without jeopardizing your other financial goals.
Getting started is easier than you think! Follow these simple steps to make your 2025 holiday spending stress-free:
Start by opening a new savings account, ideally a high-yield one. If you already have a savings account, look into creating “buckets” or sub-accounts within it. Name one of these “Holiday Fund” to keep your goal clear and focused. We personally love Ally Bank and many people on our team having been using them for years! We aren't endorsed by them in anyway, just our personal thoughts.
In January, review your holiday spending from the past two to three months. Total up what you spent on gifts, decorations, meals, and other holiday expenses. Divide this amount by 11 or 12 to calculate how much you should save each month. For example:
If you don't have a budget at all and are looking to get started, YNAB ( You Need a Budget ) is a place to start. There are many types of budgeting software available, find one that fits your eye and makes sense for you. The paid version of the apps is usually the way to go because it links up to your bank account. Many are around $100-150 per year ( we have found you will be saving much more than this each year ). Also if that feels like to much, starting a sinking fund each year so that annual subscription cost doesn't mess you up.
Consider whether your holiday spending aligns with your financial priorities. Did you spend more or less than expected? Were most purchases made with a debit or credit card? Did you regret any spending because you didn’t plan ahead?
Use these insights to set a realistic savings goal. Whether you need to adjust your monthly contributions up or down, this process ensures your holiday spending fits within your overall budget.
The key to success is automation. Set up automatic transfers from your checking account to your Holiday Fund each month on the same day and for the same amount. Alternatively, set up a direct deposit from your paycheck into this account.
Automation takes the effort out of saving and ensures you stay on track. David Bach wrote a book called The Automatic Millionaire, it is a great read and highlights the importance of automatic and forced savings and how successful of a method it is.
The beauty of a sinking fund is that it works for almost any financial goal. Whether you’re saving for vacations, birthdays, clothing, or big purchases, the same principles apply. For instance:
The discipline of using sinking funds creates freedom when it comes time to spend.
From my own experience, sinking funds are a hidden gem of financial planning. They require a bit of discipline upfront but quickly become effortless once automated. The payoff? Freedom from financial stress and the ability to spend confidently and responsibly.
Start your Holiday Sinking Fund in January, and by next holiday season, you’ll be prepared to give and celebrate without a second thought.
If you want help with to smarter money habits and a joyful, stress-free holiday season in 2025 and beyond, then Let's Talk.
All the best,
Your Wela Financial Advisory Team
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Brent Forrest & Associates, LLC. dba Wela Financial Advisory (Wela) is a registered investment adviser. The information presented is for educational purposes only. It should not be considered specific investment advice, does not take into consideration your specific situation, and does not intend to make an offer or solicitation for the sale or purchase of any securities or investment strategies. Investments involve risk and are not guaranteed. Be sure to consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. This article and images may have been enhanced by utilizing artificial intelligence (AI). Brent Forrest & Associates, LLC dba Wela Financial Advisory (Wela) is a registered investment adviser. The information presented is for educational purposes only and is not intended to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and, unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Past performance is not indicative of future performance. Wela may discuss and display, charts, graphs, formulas which are not intended to be used by themselves to determine which securities to buy or sell, or when to buy or sell them. Such charts and graphs offer limited information and should not be used on their own to make investment decisions.
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