Hope for your financial life and beyond

How to Love Paying Bills and Going Christmas Shopping

paying billsThree weeks ago I’m standing in Target crossing off the list Christmas gifts we had already purchased. My wife, who had been looking at some kid clothes, comes up to me and says, “I’m having so much fun Christmas shopping this year!”

Amazed at her enthusiasm I said, “Who are you and what have you done with my wife?”

After giving me the duck face, she replied to my quip, “It’s just so much more fun when you use cash when paying bills and purchasing the.”

That comment was in my top 5 moments from this past Christmas. Knowing our money management system was enhancing our relationship and making such an emotional impact on my wife was priceless.

If you are wondering how we had the cash to pay for all our gifts, it’s not because we allocated that much more in our December budget than normal. We started saving for Christmas in January, using a tried but true concept known as a sinking fund.

The Sinking Fund Theory to Paying Bills

The concept of a sinking fund is not new. Yet so many people fail to utilize this simple money management technique to make their lives easier. It’s one of the best practices to help you eliminate overspending moments in your monthly budget.

The term “sinking fund” is used to describe the practice of periodically (in our case monthly) setting aside money for paying bills or any expense. The best way to accomplish this is through your bank, using an automated transfer of money between accounts. At the beginning or end of each month, transfer money from your checking account into your savings account, enough to pay the expenses that are soon to be due.

Excel SpreadsheetYou will then have to find some way to track how much you have saved for each expense. We do this with an Excel spreadsheet. You can download a .pdf sample of what ours looks like by clicking here or on the Excel image to the right.

First, I designate categories that receive money each month by giving that category a name. I then research my bills to know exactly when those expenses are coming and mark those payment months with a gray box in my spreadsheet. Finally, I deposit enough into that category each month so I will have no trouble paying bills when they arrive.

We mostly use our sinking fund to be prepared for bills that don’t come monthly. The current bills we save for are life insurance, car insurance, umbrella insurance, trash pickup, pest control and our AAA membership.

In addition to paying bills, we also use it to save for summer vacation, Christmas expenses, veterinary and other dog related issues, and expenses associated with the start of school (books, clothes, fees, etc.)

A sinking fund can also be valuable for long-term saving. We currently have over half the money we need to purchase another vehicle as we are outgrowing our minivan. Another 12-16 months of saving and we will be looking at upgrading to a used Suburban-type vehicle. Best part is that when the time arrives, we will be able to pay for that vehicle with cash.

I cannot begin to describe how valuable this has been for us. Besides not going into debt for purchases, the biggest benefit of this process is the relaxation it brings to our spirit when we are out shopping or paying bills. It makes spending money enjoyable and, at some level, a very satisfying reward for our consistency and discipline in saving.

So avoid that sick feeling in your stomach for the Christmas shopping season of 2014 and all those bills in between. Start saving now and experience how fun and relaxing spending money can be.

Questions: Do you ever have trouble paying bills because you forgot the expenditure was coming? Do you save monthly for future bills or purchases? How did you pay for your Christmas presents this past year – cash, debit card, credit cards, other?

Image at FreeDigitalPhotos.net

Next Post: If You Do Anything in 2014, Please Consider Receiving This Gift

Prior Post: Some Unforeseen but Realistic Drawbacks to Chasing Your Dream

I hope you enjoyed that post. Want more?
Sign up to receive my blog posts via email and get your free gift...
99 Ways to Spend Less and Save More

Privacy Guarantee: I will not share your email with anyone.


  1. Every year, my husband and I try to keep to a budget for the two of us. What usually happens, is that one of us makes a comment about how much we spent on the other, and then the other spouse has to go out and buy something else to even out the playing field. This year, we are trying to set a limit and actually sticking to it.

  2. I have an excel sheet that I track my bills on, and I am not going to lie. I love when I can put the word “paid” in the box. It is really a sense of accomplishment that comes over me.

  3. Cat Alford/ Budget Blonde says

    I just experienced this with a vacation fund that I saved for a year and a half. I was amazed at how much more relaxed I was when I knew everything could be paid for immediately. Great feeling!

    • Absolutely Cat! I love spending money on vacation when I’ve saved for it. Best part is you don’t come back in debt…as long as you stay disciplined. Hope you are doing and feeling well. 🙂

  4. I’ve recently actively embraced this process.More in the form of the Dave Ramsey envelope system-but it’s the same thing! This year is a pivotal one because I want to accomplish a lot and I finally feel focused enough to get things done. Being proactive instead of being on the defense financially is a strange and odd feeling. It’s a good feeling.

    • If we are not proactive and tell our money what to go do with itself, it will just beat us up. It’s awesome Michelle that you are taking a more aggressive approach to your money management.

  5. Oh man, the whole sinking fund thing really changed a big part of how I manage my money. Now we do it through Ally bank, where you actually set up separate savings accounts but with the interface it’s not really any different from managing one. But we have an account for gifts, one for travel, car maintenance, etc. It’s so huge for handling those irregular expenses that you KNOW will come up.

  6. Hey Brian,
    We limit our gifts to dinners and time out. I would rather spend time with my wife than buying gifts. To a great 2014.

    • Nothing wrong with that Charles. We usually purchase one big gift that benefits the both of us at Christmas. This year it was an antique, circular pedestal table for our kitchen.

  7. Your wife is right – it’s SO much better when you have the cash!

  8. Any sort of accounting that helps you to save money before making purchases is good. I was glad to see that you use your sinking fund for both big ticket items, like automobiles. It seems that most people automatically think of taking out a loan when looking to buy a new car.

    • “…automatically think of taking out a loan when looking to buy a new car.” I think you are right Bryce. Paying cash for a car can be done, it just takes some planning and foresight. We realized two years ago we were going to grow out of this vehicle and started saving then for it. So it takes us 3-4 years to save enough money to buy a less than 5-yr. old Suburban. I’m good with that.

  9. Done by Forty says

    We use a sinking fund for our vacation expenses, and I love the convenience of it. But for calculation of savings rates, how do you treat that money? Is it savings on the way in, and spending on the way out?

    • I don’t calculate it as part of our long-term savings strategy at all. That amount is a separate transaction. I actually code the sinking fund money into our monthly budget as an expense. So when the bank transfer occurs at the end of the month, I’m mentally thinking that I’ve already spent that money, even though it sits in my savings account for several months. So I guess I look at it as spending on the way in, if I understand your question.

  10. Great overview Brian! This is essentially what we’ve been doing for years as it just makes it so much easier to plan for our purchases throughout the year. We also do the bucket savings approach where we save for vacations, a car purchase, etc. With the Christmas gifts we buy them on our credit card to get the points and then deposit the cash to pay off the bill when it comes.

    • The credit card approach you are taking is a good one John. If you are going to put something on a card you have to be able to pay it off when the bill comes. Most people don’t and that’s what gets them into trouble.

  11. Six Figures Under says

    We did the sinking fund for expenses like life insurance, car insurance, and other bills that don’t come monthly. We also did it for car repair and home improvements and expenses that would inevitably come (and be expensive) sooner or later. It works really nicely when you automate it.

    We have stopped doing it lately, so we can put everything toward our student loans, rather than have a year’s worth of premiums sitting in an account, we put it toward the loans. Then when the big payments are due (or unforeseen expenses pop up), we just don’t pay as much on debt those months. Since we don’t have any payments due yet for the student loans we can do this. It would be more risky if you had a tight budget with payments due.

    We haven’t done it specifically for Christmas though 🙂 I do shop for Christmas all year round though, so it doesn’t all hit in December.

    • I like the plan of shopping for Christmas all year round. You are basically doing the same thing we are, except instead of saving the cash each month you are putting it towards a gift. I’ve never been able to do that. I can’t get in the gift buying spirit until December hits. Kudos to you for being able to think ahead.

  12. For years, we didn’t do this and when the yearly type bills rolled in, usually around April for some reason, we had to start using the credit card. I’m not sure why we never learned, but I guess when you owe so much, it doesn’t seem that hard to just charge it. When we started getting out of debt, I made a plan similar to yours, where we send x amount each month to an online savings account that we don’t see every day. It was wonderful to have the funds when those bills came due. We are in much better shape now, but I think that is a huge step toward breaking the debt cycle. I know how your wife feels!

    • “…a huge step toward breaking the debt cycle.” That’s a great point. When you have the cash to pay for a bill there is zero chance you are going into debt.

  13. I would really like to save for Christmas throughout the year. I don’t usually have an issue when it comes to getting the money together, but I think saving ahead of time does give you peace of mind which is nice.

  14. I do this with my various savings buckets like saving for a new car, taxes, my e-fund and vacation, but I never thought about it for other expenses that don’t happen monthly like car insurance, paying for my accountant each March, etc. It makes total sense to do it though! I have it budgeted, but it’s not like that makes the money “real.”

    • The reason we did that with the non-monthly bills was because we were always getting “surprised” by them. You know they are coming but kind of forget about them because they don’t happen regularly. Then when that bill came it threw off that month’s budget. Allocating money each month for the upcoming bill kept our monthly budget from fluctuating wildly up and down.

  15. You’re so right, Brian: paying cash for Christmas is awesome!! We did that this year, and it really does reduce your stress. We are also, slowly as we work to pay off debt, learning to stock up cash for stuff that we’ll have to pay for in the future. There’s something motivating about working with cash, isn’t there? BTW, you’ll love having a Suburban type of a vehicle. They are cozy and comfy with tons of room!!

    • I’m semi-envious of all my friends with large families who already have one. But I’ll be disciplined and wait until we can pay cash for it.

  16. I’ve never head of the term “sinking fund” but I guess it’s the strategy I’ve always employed. I like to allocate a percentage of each paycheck for giving (gifts, occasions, donations), typically between 1-5%.

    • Yep…that’s what you are doing…sinking money away for later use. I believe the process was originally used in 18th century Britain as a means to paying off the national debt.

  17. Holly Johnson says

    Years ago, I would save throughout the year for Christmas. Last year, I didn’t do that but it worked out fine. I didn’t spend that much anyways and we save about 50% of our income so it wasn’t a problem.

  18. FI Pilgrim says

    This was the same for us this year! After all the Christmas gifts had been purchased we still had $25 left in our Christmas Gifts budget category, which made it a very stress-free experience! And I highly recommend YNAB, which operates in an envelope-based manner by default. Easier than Excel for us.

  19. We paid for Christmas gifts in cash, which was a great feeling. My poor wife works 5 1/2 or sometimes 6 days a week, so the last 1/2 day or 1 day goes in a special fund for stuff like Christmas, donations to our friend who is a missionary, savings, etc. It was nice to have the extra cash to pay for gifts. I like your spreadsheet, nice and simple. Sometimes people get too fancy with spreadsheets and it becomes hard to work with if you aren’t familiar with it (guilty).

    • I think this is one reason January is such a depressing month for people. Besides being in the middle of winter, it’s when most people realize some regret over the debt they incurred through their Christmas shopping. Many people end up paying off their gifts over several months.

  20. Timely article for January planning! One other point i would add is that some banks will allow you to open up a ‘main’ savings account from which you can then disperse savings into several ‘sub accounts’. A great way to organize!


  1. Carnival of Money Pros – By AvantCredit says:

    […] Fourman @ Luke1428 writes How to Love Paying Bills and Going Christmas Shopping in 2014 – The concept of a sinking fund is not new. Yet so many people fail to utilize this simple […]

  2. […] Fourman @ Luke1428 writes How to Love Paying Bills and Going Christmas Shopping in 2014 – The concept of a sinking fund is not new. Yet so many people fail to utilize this simple […]

  3. Aspiring Blogger – Personal Finance Carnival #27 – January 17, 2014 says:

    […] Fourman @ Luke1428 writes How to Love Paying Bills and Going Christmas Shopping in 2014 – The concept of a sinking fund is not new. Yet so many people fail to utilize this simple […]

Speak Your Mind