How to Have a Debt-Free Christmas


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Have you ever been stuck paying off Christmas credit card bills well into the new year? If you answered yes, this article is for you. Today I’m sharing the most foolproof way to have a completely debt-free Christmas!

According to CNBC, “Only 42 percent of shoppers said they’ll pay off their purchases in three months or less. More said it will take five months or more, according to one report.” 

What’s worse is, if you only make the minimum payments, it could take more than five years with most credit cards!

While those are daunting statistics, the good news is that this year can be different for you and your family! 

Here is an easy, step-by-step guide on getting out of the holiday debt cycle and having a debt-free Christmas year after year!


1. Start thinking about Christmas in January 

Don’t wait until November to start thinking about how you’re going to afford the holidays. The best time to plan and prepare is actually in January! 

You may be putting away the tinsel and bows, but it’s time to break out your budget plan for Christmas next year! 

Start setting aside money right away from every check, or once per month starting from, well, the very start of the new year.

2. Calculate how much you’ll need

In order to begin setting money aside in January, you’ll need to know exactly how much money your goal amount is for Christmas next year.

I recommend calculating what you spent on the latest Christmas season, beginning with gifts. Add up everything from presents, travel, office party expenses, and any holiday activities. 

If you don’t know where to start, or if that seems too overwhelming, the average family spends $1,000 or more on “gifts, travel, and goodies.”

Less or more is completely fine too! This amount is your starting point.

Check out my Black + White Cash envelope set that I printed out on red cardstock paper to make my Christmas sinking fund envelope.

3. Start a Christmas sinking fund

Simply put, a sinking fund is a standalone savings fund where you deposit an allotted amount of money per month for a specific end goal or purchase. This can be Christmas, new tires, a vacation — really anything.

After you calculate how much you want to have by next year’s holiday season, you need to divide that by the number of months it will take you to save it.

So if you want to start in January and have your Christmas cash be fully funded by October, divide your total amount needed by 10.

Ideally, you’ll pull your Christmas cash out of your sinking fund in October so that you’re not shopping last minute!

The goal amount and number of months you’ll be saving will determine the number that you need to save each month into a Christmas sinking fund. For example:

Needed Amount# of monthsTotal to save monthly
$50010$50 per month
$1,00010 $100 per month
$1,50010$150 per month

You can keep this Christmas sinking fund in cash or you can open a unique savings account and store it there. I prefer keeping it in cash and tucked away so I don’t spend it!

christmas cash envelope

4. Start saving

The next and final step is to start implementing your plan. Save your money each month and watch it grow! This is the way my family and I got out of the toxic holiday debt cycle and really began to enjoy the Christmas season.

This year we saved $100/mo in cash for 10 months (January-October) for a grand total of $1000 of Christmas cash ready to go by November 1! It makes Christmas so much more delightful and enjoyable. 

After all, that’s what it’s all about!

How much are you spending this Christmas season? Have you started your Christmas sinking fund? Let me know!

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debt-free Christmas pin image
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About the Author

Welcome! My name is Merilee and I’m the creator of Easy Budget. I started this blog to help other families like mine crush debt, budget, manage money, and meal plan like pros!

Everything you find here will be useful, motivating, and always easy. Need to contact me directly? Reach me here!

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