It’s no secret that I love sinking funds! Life is so much easier when money is set aside for certain expenses. Today’s post is about five useful sinking funds I advise you to take into consideration in your budget today!
These are by no means ranked by order of importance or usefulness. And, depending on your lifestyle they may not all be necessary. But they are worth consideration.
Related Video: An Intro to Sinking Funds
FIVE USEFUL SINKING FUNDS TO CONSIDER:
AUTO MAINTENANCE FUND
If you live in a more suburban/rural area as I do you probably own a car. Public transportation is not the best in my area, and we rely on our vehicles to get us to work, school, and run all our errands.
This makes an auto maintenance sinking fund one of the most useful sinking funds we have! Thankfully our cars are paid for, and we take good care of them in order to keep them on the road as long as possible.
That’s why we implemented our auto maintenance sinking fund just over a year ago; we deposit money into a separate checking account regularly to use specifically for vehicle maintenance.
Most recently, I paid the tag renewal on our 2010 Rav-4 with the sinking fund. Anything needed for the vehicles such as wiper blades, oil changes, tires… it comes from the sinking fund.
We keep a close eye on what is in the account and what maintenance will be needed. Contributions to the fund vary from month to month based on other budgetary needs and expenses we know are coming.
This fund has come in very handy to have and my only regret is that we started it sooner! In fact, a few days after opening the account we needed to replace a tire.
While we didn’t have enough money in the fund yet to cover the replacement of the tire, it only reinforced our decision to start this sinking fund.
And, since vehicles don’t last forever it’s also a good idea to set money aside to help replace your current vehicle down the road.
CLOTHING SINKING FUND
A sinking fund for clothing can be quite useful, especially if you have a bit of a shopping habit or just growing kids. Clothing has to be bought almost every season if you have children at home.
Setting up a sinking fund for clothing, either with cash or a separate checking account is a great way to ensure everyone has what they need to wear.
It also helps curb additional spending; if it’s not in the envelope or the checking account you won’t be able to spend it.
Look into a free checking account with no overdraft protection that will decline charges over the balance of your account. This will be particularly useful if you suffer from the urge to splurge in this category.
From time to time I keep a clothing fund in cash to use specifically at thrift stores and yard sales. I haven’t done quite as much shopping this year due to the pandemic, but slowly have to start venturing back out there due to the changing seasons.
VACATION FUND
Who doesn’t love a good vacation?! Long distance travel isn’t quite yet a possibility for most, but it will be. Why not plan and save ahead?
Travel restrictions won’t be in place forever, so why not start planning for that dream vacation now? Do your research and see how much money it will take.
Figure out when you want to go and how much you can afford to set aside each month to make it happen! It’s that simple!
Just be sure to set the money in a different account so it doesn’t get spent on anything else. It’s never a good idea to leave that money in your regular checking account.
Open up a free checking or high yield savings account you can easily access when the time finally comes. This is one of the more fun useful sinking funds on this list!
We recently used a shorter term sinking fund to cover the expense of a little mini getaway fishing trip. While the cost wasn’t extravagant, it was much easier to split it up between two different months in the budget.
This is rather simple to do with shorter term goals, but with longer term goals I would definitely recommend the separate accounts mentioned above.
GIFT GIVING SINKING FUND
We personally have a Christmas sinking fund. I’ve mentioned it a few times, most recently in Six Month Countdown: Budget for Christmas Now!
Every pay period a set amount is deducted from my husband’s check is deposited into our Christmas account. The money sets there until early November when the interest is paid and we are issued a check.
I try to make sure to have our shopping list set by the time this happens. Then all I have to do is make the purchases. For items that take longer to arrive or need special consideration we are able to make a set number of withdrawals throughout the year without penalty.
So if I find the perfect gift for someone in July I can simply withdraw the funds and buy it then without adjusting my July budget. Be sure to check the terms on your Christmas account prior to making any early withdrawals.
This makes Christmas so much less stressful since our savings is literally on auto pilot all year. We don’t have to make large budget adjustments the last few months of the year to be able to purchase gifts.
It’s also pretty easy to guesstimate how much money will be in the fund by the time we get paid so we can determine how to allocate the money. This makes it easier to determine our purchases beforehand.
This is definitely a sinking fund I highly recommend starting if you don’t already have one. Christmas happens at the same time every year. Why not plan for it by setting aside a little each month whenever possible?
It can also be handy to set money aside every month for any gift giving, and not just Christmas. Some people use sinking funds to pay for birthdays, anniversaries, and other gifts.
This is a great way to cover things that may pop up from time to time such as baby or wedding showers.
HOME MAINTENANCE/FURNISHINGS FUND
This is a useful sinking fund I would definitely recommend if you are a homeowner. Even if you buy your home brand new with a warranty there will be expenses that come up from time to time.
Our old house was a fixer upper and we utilized sinking funds often for each of our remodeling projects. We set aside money every month and designated it for whatever project was being planned or already in process.
By doing so we were able to pay cash to remodel almost the entire house room by room. It was pretty bittersweet that we didn’t make it entirely through the house until it was listed for sale.
Now we will employ sinking funds from time to time for projects around the new house. There are a few projects we’d like to accomplish in the coming year and by setting aside a little at a time it will make it much easier to fund.
The fact of the matter is you never know when an appliance is going to need maintenance or be replaced; even though our appliances still seem new to us, they are already outside warranty and we’ve had one repair bill this year.
Setting up a sinking fund can make these somewhat unexpected occurrences much easier to bare and help prevent the accumulation of more debt in order to get things taken care of. And I’m all for avoiding that sort of debt!
Or, if you don’t yet own a home you might have started a sinking fund for your down payment!
THESE ARE JUST A FEW EXAMPLES OF USEFUL SINKING FUNDS TO USEIN YOUR BUDGET
There are plenty others to consider such as health and medical expenses; for example we have a flexible spending account. If you have a high deductible health plan you may have a health savings account available to you.
These funds are great ways to cover co-pays and prescriptions as well as other approved health related expenses. You may even utilize a sinking fund if you pay for your car insurance every six months instead of on a monthly basis.
The possibilities really are endless here; any large expense that is expected in the future can be financed through a sinking fund.
Do you already use sinking funds? After reading this are you inspired to start one or more? Let me know in the comments!
And, if you’re not sure how to set up a sinking fund in your existing budget or where to get started with your monthly budget so you can start sinking funds check out my affordable budget coaching services! I’d love to help you get started using sinking funds!
I’ll be back on Meal Plan Monday for my Frugal Friends and will have a new post for you on Tuesday. Until then, stay frugal my friends!
These are all so great to include in your budget for sure! Thanks so much for sharing!
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