Today I’m going to be sharing with you the Top Sinking Funds Everyone Should Have.
One of the problems you may encounter when you start budgeting as a beginner is spending money in places you hadn’t anticipated. This is to be expected in budgeting – you’ll have to make adjustments along the way.
To help you out, take a look at these 23 budget categories or “sinking funds.”
Sinking Fund defined: A sinking fund (or reserve fund) is a budget category that you don’t necessarily need every month, but that you want to contribute to, in order to start building up a balance. You “sink” or save money into a budget category or “fund” and let it build up over time.
Using sinking funds is a less stressful way to budget and pay your bills than trying to deal with each one when it’s due.
A sinking fund is different than an emergency savings because in a sinking fund, you are telling your money where to go, instead of letting an emergency dictate where you spend it.
Top Sinking Funds Everyone Should Have
Here’s how it works for us.
We pay our car insurance just once a year. But with 2 cars and living in a high cost state, our insurance bill is $1600. Yikes! I don’t want to have to face that bill without money in the bank.
So instead of scraping up the money when the bill is due, we put $130 every month into our car insurance sinking fund. By the time the insurance bill is due, we have the total amount saved up. I can write a check without having to worry that it won’t clear.
Another example of a helpful sinking fund is for variable utility bills.
If your winter heating bills are much higher than your spring and fall bills, you may experience a shock when you open that February bill! But if you’ve been putting a little extra into a utilities sinking fund all year, you can pay that February bill without having to take money out of say, the grocery budget.
Here is a list of 23 different sinking funds:
- Car repairs
- Car insurance
- New car savings
- Homeowners insurance
- Life insurance
- Taxes
- Doctor / dentist
- Medication
- Vacation
- Christmas / Holidays
- Gifts
- Fees and licenses (car registration, etc.)
- Dues and subscriptions (magazines, memberships)
- School and education fees
- School tuition
- Pets
- Utilities
- Home maintenance and repairs
- Kids sports and activities
- Miscellaneous
- Travel
- College savings
- Emergency fund
Where do you find the money to put into these sinking funds?
You start with the most critical ones. This means bills that are due soon and larger bills.
If you know your car insurance is due in 3 months, start adding to that fund first. You might not be able to fully fund it before it’s due, but even having some money set aside helps.
Find ways to save on your expenses (like electricity and groceries). Then put the money saved toward your sinking funds.
You can also contribute a little each month to some of the smaller funds.
If you put $5-$10 a month into the gifts fund, you’ll have enough to buy a present for a birthday party in just a month or two. Shop around at a few cashback sites before you order (here’s Sarah Titus’ favorite cashback site) and you’ll have a great present that wasn’t a burden to buy.
You might also spend some extra time working from home. Earn an extra couple hundred dollars a month to fund your sinking funds and ease the strain on your budget.
