Plan for the Future
One thing I always hear when talking to people about their finances is an emergency hit them. Most of the time though, that emergency is something they should have seen coming. Things like Christmas, clothes, and vacation. The car breaking down or something broke in their house. These are all things we should be able to see coming. When it comes to emergencies happening, it’s not IF it’s WHEN.
Sinking Funds are Separated Savings
If you haven’t ever heard the term “Sinking funds,” it’s simply another way of saying a savings fund for something specific. Here are a few items you can use sinking funds to save for the future:
- CAR: Repairs, Registration, Insurance, Replacement
- TAXES: Property, Income, Sales
- CLOTHES: Both Adults’ and Children’s
- HOUSE: Repairs, HOA, Insurance, Purchase
- GIFTS: Christmas, Birthdays, Anniversaries
- MEMBERSHIPS: Non-monthly subscription services
- SUPPLIES: School, Books, Programs, Work
You get the idea. Anything you need to save money for in the future can have a sinking fund. You can put these funds into a separate savings account for easy access when they’re needed. That way, they can even draw a bit of interest while they’re being saved up.
Keeping Track of What Your Saving
There can be a lot of different ways for you to keep track of what your saving in your sinking funds. For me, I use an excel spreadsheet that calculates how much money I have in each sinking fund as I deposit money into our savings account. This is easiest for me. I have heard of some banks making this possible for you, but I haven’t ever used them.
You can use whatever is easiest for you. I urge you to keep track of what you are saving so you don’t spend money on the wrong thing. This kind of tracking helps me know exactly what I’m spending money on.
Saving is an Expense
In day 2 of Budgeting, we learned we needed to trim the fat of our expenses so that we wouldn’t surpass our income. When you start saving for items in your sinking fund, you’ll have to start including these as expenses as well. These expenses simply get moved over to a different account, but you have to budget for them.
If you know you have to save for items and didn’t trim the fat on your current expenses enough, go back and trim more fat. Any expense you can cut more out of, the better. By saving for the future, you’ll have a little more freedom to understand where your money is going, rather than having to figure out where it went.