Sinking funds is money saved or put aside you intend to spend. Sinking funds make saving money easier and help you prepare for the expected and unexpected. Here are some of the categories you can create a sinking fund for:
- Vehicle maintenance or replacement
- School and/or certification
- Children's activities
- Future Children or grandchildren
- Medical expenses
- Home repairs or upgrades
- Wedding or
- An upcoming sale at your favorite store
There are two way you can achieve this.
Find the average amount you spent the previous year in whichever category, divide it by either 12 (months) or 11 (months), then save that amount monthly.
- You spent $300 at KeryKay Candles during the black Friday sale in 2020. $300/12 = $25 or $300/11 = $27.27. You can choose to save $25/month for 12 months or $28/month for 11 months.
Set a maximum amount of money you want to spend annually and contribute an equal amount every month.
- You want to save $3000 annually for vacations. $3000/12 = $250/month. You would save $250 every month.
At one point I only had an emergency savings and I didn't want to use my emergency savings for hardly anything. Very little felt like an emergency. I needed a new plan, I read about sinking funds, began opened more savings accounts, and set them on auto draft. I wanted to have at least $500 saved for vehicle maintenance due to the fact I've had my vehicle for about five years and at this time have only needed regular maintenance. Once I met my goal I stopped saving. One road trip later, I'm in a chain repair shop needing to have my exhaust manifold replaced because it was cracked. I had enough money and time to make it to my favorite local mechanic, and have my car repaired cheaper than the $400+ quote. The entire situation was stress free because I had already put the money aside specifically for my car.
I encourage you to take a proactive approach to lesson or eliminate potential financial burdens or book an appointment and I'll take care of the rest!