Sinking Funds

avoid that sinking feeling

Avoid the Sinking Feeling that Comes with not Planning Ahead

Set Money Aside for Larger Expenses in Advance

Sinking funds are an excellent way to cover infrequent, larger expenses and avoid that sinking feeling you get when you reach for the credit card to cover an expense you knew was coming but just didn’t plan for. They aren’t as complicated as they may sound either! We used them to cash flow home renovation projects and major purchases long before we knew what they were called.

In essence, a sinking fund is a separate bank account or cash envelope you contribute to for a specific, typically larger expense. Say you plan to “sink” money into vehicle maintenance, a new(er) car fund, or save for a down payment on a house. You may pay your insurance premiums quarterly or annually for a discount. You expect these expenses and set aside money on a regular basis. These are all sinking funds. You may have one or more going and simply refer to it by its purpose; the car fund, new house fund, maintenance fund…

More recently we employed the sinking fund method to cash flow our property tax bill. We set aside a specific amount each month for three months and then paid the bill in full. This avoided an uncomfortable budget deficit one month or the need to raid our primary savings.

Or, you may find it beneficial to set up sinking funds for other recurring expenses that add up but don’t necessarily happen every month. Examples include a birthday fund, Christmas gift fund, clothing, etc. Avoid that sinking feeling and the urge to go into debt when the kids hit that inevitable growth spurt or tear through the knees of all their good pants.

You know it’s going to happen, so why not plan for it?

If you have any questions or just want to join the conversation drop them in the comments to this post or send me an email. I would love to talk more.

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Birthday Party Budget Breakdown

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How’d we do?

I previously posted how we planned to host the kids’ birthday party on a $150 budget including food and kids’ gifts. You can click here to read that if you missed it. Here is the budget breakdown:

budget breakdown

We spent $69 for martial arts lessons for our daughter and she is loving the classes! Our little white belt just earned her first stripe this week for learning her first basic form!

We also spent a total of $54.93 on the previously mentioned sit on tractor and T-ball set from Amazon.

I also spent $12.92 at Target on a felt tool set for my son and favor bags (which I forgot to fill, so they’re ready for next year!). That made a total of $136.85 of the $150 budget.

But what about the food?

budget breakdown
Pickup portion of food

Where is the food in the budget breakdown you ask? We didn’t have to use the budget for the party food! My husband helped a coworker after work one day and was given $40 in return. I used that unexpected money and paid for burger patties, turkey dogs, buns, cake mix, frosting, a fruit bowl, condiments, lettuce, and tomatoes with cash!

So for the budget breakdown purposes, we were able to use $13.15 elsewhere in our monthly budget. Like the newbie I am at this blogging thing I forgot to take pictures of the spread before everyone dug in!

Not too shabby! Would you call that under or over? Technically I think it could go either way since we did spend money, but it wasn’t all from the budget. Let me know what you think!

Have you hosted any parties lately? How did you do on your budget? Let me know in the comments! I’d love to hear how you entertain your loved ones on a dime!

budget breakdown
Play Ball!
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Six Months til Christmas

Will you be ready?

We are exactly six months away from Christmas; is your Christmas budget ready? Know how you’re going to pay for all those holiday expenses? If so, great! Haven’t got a clue? You still have time to get it together!

Our family has a sinking fund for Christmas. Every pay period $15 automatically gets deducted from my husband’s check and deposited into our Christmas savings account. It is on auto-pilot.

In the fall interest will be paid and a check is given to us to do our shopping. If I happen to find the perfect gift for someone on our list before that I can withdraw up to a certain amount without having to pull from another budget category. This allows some flexibility while still earning a little interest.

If that isn’t for you…

Not interested in setting up an extra account? Simply create a cash sinking fund and pull out a designated amount every paycheck or every month.

With a little bit of planning now you can still manage a little something special for everyone on your list without resorting to credit cards.

Set aside cash so you can be sure you have the funds in place to get your holiday cheer on when the time comes without reaching for the plastic.

Get a Side Hustle

Don’t have room in the monthly budget for gift giving? Get yourself a side hustle to set some aside for gifting and get a bit ahead of your expenses. Your bank account will thank you long after Christmas if you get your financial life in order now.

Downsize Your Gift List or Opt Out of Gifts Altogether

There is nothing wrong with this option either. The true spirit of Christmas is about a baby in a cradle who died on a cross for our sins. The gift giving commercial aspect isn’t a requirement for goodwill to man. Now is the time to let those you typically exchange gifts with that you are doing things differently this year. They may be relieved to save some money too.

If your extended family that gets together is simply too big to afford gifts for everyone participate in a name exchange and only worry about buying for one person. Let the kids exchange names too so they don’t go home empty handed or end up with an even more crowded toy box.

Have a potluck Christmas dinner and go caroling, check out the town lights, or attend a special service together instead of your annual gift exchange.

Is your Christmas budget ready? Let me know in the comments or head over to Instagram and join in on the conversation there! I’d love to hear your plans and how you plan to celebrate Christmas with your loved ones on a dime.

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