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I’ve been thinking a lot lately about saving for the things I want to spend money on, and even the things I don’t! You may be saving for a vacation or a new car, or you may have pets that throw you a curveball and get sick out of the blue. The beauty of a budget is that you get to decide where your money goes – and sinking funds are how! Keep reading for a list of sinking funds that you might just want to add to your budget today! Plus, I have a new sinking fund freebie coming your way! But first …
What on earth IS a sinking fund?
Sinking funds are just a fancy way of describing savings – you are sinking (saving) money into a fund (bank account) and letting it build up over time.
You can use sinking funds for expenses you know are coming up in the future, like annual insurance bills, taxes, or golf membership dues.
You can also use them for unforeseen expenses when you don’t have a set goal, but you know you need to have money tucked aside. For example, expenses like car repairs or vet bills are great sinking funds!
Finally, you can use sinking funds as a way to save for bigger expenses that you can’t cash flow in your monthly budget. If you want to take the family to Disneyland next year, start saving now!
Protecting your Emergency Fund
I think of my Sinking Funds as insurance for my Emergency Fund. I never want to dip into my emergency stash of cash – so I save for the things I want (which would not count as an emergency, for the record), but I also save for the things I don’t want!
Our cat, Mowgli, has been sick basically throughout the pandemic. One of the only places we have ventured out to has been to the vet, and we’ve had more phone calls with sweet Dr. Erin than anyone else. And do you know what is tough when you have a sick pet? Worrying about the cost. He’s had blood work and lab tests and dental surgery and an emergency ultrasound. Honestly, we’ve spent more money in the past three months than we have in the past nine years.
Luckily, we no longer live paycheque to paycheque and have been able to cashflow these expenses. But it definitely puts a bit of a damper on our plans when all of our extra cash goes towards these dang bills, rather than things we want.
The kicker is, IF I’d been following my own advice and saving properly for our pets since we got them, we’d have a little nest egg to lean into when this type of expense arises. But we’ve been fortunate, and both our fur babies have been very healthy. So while I have a pet sinking fund, it was minimal – enough that after food, I was saving a bit each month, but not as much as I could or should have.
SO – long-winded story over – here is a list of sinking funds you may want to think about having in your budget!
Sinking Funds You Might Be Missing
- Pet Expenses
- Car Repairs
- Car Replacement
- Insurance (Car/Home/Life)
- Annual Fees or Memberships
- Home Repairs
- Sports Fees
- Doctor/Dentist visits
- School Fees
- Tuition or College savings
This list is a starting point – you can customize it for what works for your life!
If you don’t have kids at home or aren’t contributing to their education, you don’t need a sinking fund for tuition.
If your health care coverage is awesome and you don’t pay out of pocket for medical or dental care, then you don’t need a sinking fund in your list for that.
The point is to make it work for you!
What to Choose First
This list is lengthy, and there is no perfect answer to which is most important. In your budget, start with the expenses that are coming up fast or have a higher price tag.
Make sure you have your annual insurance fees covered before you allocate a bunch of money to your family vacation or your home renovation.
I’ll say it again – the best part of budgeting is making it personal to what works for YOU! Align your funds with your goals for the future.
Keep it Simple
There are lots of different ways to organize this money. Some people have individual bank accounts for each fund. To me, this is too complicated. I have one account where I keep all of my sinking funds.
Money is hard enough – don’t overcomplicate it for yourself!
The key isn’t separating each fund into its own account; it is simply having a way to keep track of each fund’s balance.
I keep track of my sinking funds in my budgeting program – EveryDollar. I set how much will go into the fund at the beginning of the month. At a glance I can see the balance, and any purchases I’ve made through the month.
Some funds go up and down, like my pet care fund or car maintenance.
Others consistently grow until I need to make my payment, like saving for our Disneyland trip. Once that trip is over, I’ll take that sinking fund out of my budget because I won’t need it anymore! (For the record, that trip has been postponed to some distant time in the future where travel is possible again.)
Keep it Organized
One extra step is making sure that what you have in your savings account matches the balance you should have in the various sinking funds.
I know I just said to keep it simple, but I do have one extra step in my sinking fund management. I use a simple spreadsheet to track the balance of my funds. At the end of each month, I update the balance of each one (based on my EveryDollar totals) to quickly see the total that should be in my sinking fund account.
Maybe to you, this seems simple, but it can get confusing with money coming in and out through the month, and I don’t always transfer the cash in when I should.
So I use this sinking fund tracker to make sure everything is where it is supposed to be!
Using sinking funds to save for the important things in life will transform your finances. Personalizing your savings and having specific goals keeps you focused, and using the tracker keeps you organized!
Do you use a sinking fund that we missed? Join us on Facebook to share what you are saving for, and help inspire someone else!