Monday, February 6, 2017

Money Monday: Sinking Funds

Do you have sinking funds? Do you know what a sinking fund is?

Sinking Funds is a savings tool for something you will have come up. You're planning for unexpected budget items that come up occasionally. Having a sinking fund allows you to put money aside for Christmas, clothing, car repairs, or medical expenses. You save for those things, so that when they do come up it doesn't throw your budget off.

Another example that you can use a sinking fund for is something that doesn't come up every month, but you know it will come up eventually; such as a yearly bill, or yearly maintenance. You can figure out how much that will be, and save for it monthly.

For example, you want to save 1000$ for Christmas and it's March. If you budget 100$ a month for 10 months. You'll have the 1000$ by Christmas. You have that money set aside specifically for Christmas and you can spend it knowing that you saved for it. No guilt!

How do you keep track of sinking funds?

Online Savings Account

I have a separate savings account for each of the things that I'm saving for. These online savings accounts do not cost money and I can transfer out money without any fees. It's really fast, and can be done on my phone. Having these separate accounts allows me to see how much is put away for each thing. I'm really not a numbers person, and having everything in one account doesn't work for me.

Cash Envelopes

You can also have separate envelopes and put money into these each month.


If you keep every thing in one account, and have a spreadsheet to track each fund that can work too.

Sinking funds have really changed the way I manage money. It has helped me prioritize, and be more in control. You want to have this money easily accessible, and the more money you have set aside, make sure it's secure. This is different from an emergency fund, because an emergency fund is money set aside for an unknown. A sinking fund is money set aside for a specific thing.

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