Sinking funds are a way to save a little bit every paycheck to pay for a planned expense.
Like most personal finance plans, saving money takes planning, intention, and dedication.
Imagine this:
You’re paying off a significant portion of debt down, but you feel so stressed because you’re constantly pulling from the month’s budget for expenses that should have had money already set aside.
Needless to say, this method of budgeting IS NOT sustainable.
This is the beauty of sinking funds. You can save up for expenses in advance, and then not have to worry about them when they come up!
How You Can Prepare:
I want you to look back at the last 6 months of your expenses. What expense surprised you?
Will this same expense come up again in the next 6 months? How can you prepare now so that you’re not dipping into more debt to cover the cost?
What about other expenses coming up in the next 6 months.
With how this year has been going, the holidays will be here before you know it! Make a plan now to save up for them.
I’ve included a FREE worksheet to help you figure out what you need to save for, how much it’ll cost and how much you need to put aside from every paycheck (monthly & biweekly).
Why is this important?
I realized year after year, certain expenses came up that impacted my budget significantly.
There were also pesky expenses that left me swiping my credit card because I wasn’t prepared for the cost, but I needed the money, like my yearly license plate fee which cost $120.
For example, do you want to take your family of four to Disney World? There goes $4,000.
Phone broke and need a new one? That will cost $1500.
What about all of the wedding and birthday expenses that come up every year? That’s $500.
How about a down payment on a home, or those new snow tires you know you will need next year?
The truth is, these type of expenses come up, and you need to have a way to pay for it (without going into debt).
When you add sinking funds to your budget, you can:
- Save for ANYTHING.
- Ditch guilt.
- Be PREPARED with cash.
- Plan for the unexpected.
If you don’t know where to start, I’m hosting a *free* training today on HOW to build your budget in 3 EASY steps that you’ve never tried before! 🤗⠀
*Click here to join my FREE budget TRAINING* LIMITED SPOTS⠀
You’ll learn:⠀⠀
✅ My signature step-by-step method on how to build your budget that’s helped over 3,000 women build their budget (with specific examples!)⠀
✅ The biggest mistake hard-time working women make with their paychecks & why you still don’t have a working budget (even if you’re starting at zero!)
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✅ Why every budget you’ve tried doesn’t work & how my strategies will⠀
Now back to the savings talk…
If you have the same $600 every month to put towards saving, divide the $600 into four sinking fund categories:
- $100 for vacation
- $200 for home maintenance
- $100 for medical expenses
- $200 for car repairs
At the end of the year, your sinking fund totals would equal:
- $1,200 for vacation
- $2,400 for home maintenance
- $1,200 for medical expenses
- $2,400 for car repairs
Now, you will be able to replace your A/C unit, go on vacation and cover your unexpected medical expenses.
This is all accomplished without touching your credit card, and you still get what you need and want without losing your sanity or feeling stressed.
I want to set you up for success from the beginning so, I want you to include these items in your sinking funds, if you haven’t already and only IF they apply to you.
These are some sinking funds that you should be saving for but did not include:
- Gifts
- Clothes
- Home Maintenance
- Car Maintenance
- Medical Expenses
- Luxury
- Self-Care
- Vacation
- Subscriptions
- Licences
Now, if you realized that you forgot one, I’m glad I reminded you of some of the things that you need to save for. I’ve already made these mistakes.
So how do you keep track of sinking funds?
This completely depends on your budget and what you’re comfortable with. I keep track of them on 2 things:
- A worksheet (pictured above)- a table that shows my savings progress every month which ALSO lives in my budget binder and SOLD in the PRINTABLE BUDGET PLANNER in my SHOP
- A sinking fund tracker- taped to a VERY BASIC white envelope that’s hole-punched and lives in my budget binder- nothing fancy here. My students get it for FREE in my course, The Build your Budget Lab! Get more info here!
*Click here to join my FREE budget TRAINING* LIMITED SPOTS⠀
In this next post below, I discuss the 4 Things that Happen when you Start to Budget. Now that I’ve started a budgeting system that WORKS, I can’t imagine living the rest of my life without budgeting.
Remember,
