Sinking Fund, My Saving Grace

I committed several financial mistakes in my past life and one of them was my failure to save up for expenses that I knew was forthcoming. These are predictable bills that come up at a later date and processed annually, quarterly,  or semi-annually.

I knew I had the money to pay for these bills but when it’s pay time, it still hurts the pocket.

I hated the feeling; I thought there must be a better and effective way of making things less complicated than they may seem.

My eagerness to get out of the hole I was in led me to do my own research and find working solutions. I spent several sleepless nights as I am a person that won’t stop until I figure something out. It was a trial-and-error in the beginning until I eventually felt comfortable in the entire process.

One of those payments that we had to pay upfront is the car registration fee and green slip; this comes only once a year. When this comes up, we’d use the credit card and would start budgeting for the credit card payment. 

Only to realise that there is a better way of doing it without having to swipe the credit card and be in debt. 

How it works

Sinking fund allows you to sink money and save for things you know are coming up and for bigger things that you may want. You fund them a little from each paycheck until it is fully funded. 

You may opt to go cashless for this as you won’t be needing it immediately. Stacking the fund in your cash envelope is also perfectly fine.

I find it to be a really good system that has been the missing piece in my budgeting methods in the past. With sinking fund, I have every single thing in my family’s life covered.

By saving cash for each categories on your budget a little at a time, you do not realise that you are building it and you are ultimately not caught off guard when it’s pay time. 

Below are some examples:

  1. Family Events (birthdays,  anniversary, etc. )
  2. Car insurance
  3. Car Repair and Maintenance
  4. Medical, Dental, & Optical Fund
  5. Holiday Fund
My sinking fund using a budget app

The ultimate purpose of sinking fund is for you not to incur any new debt. I only do sinking funds for things that are 100% essential and money that I would have to spend no matter what. But if you wish to give yourself a reward, building a sinking fund is also the way to go.

Sinking funds can also be tricky.  If you are having trouble with having too many then you may have to make some tough decisions- keep the essentials and eliminate the unnecessary ones. 

What it meant for me

Sinking fund makes it easier to dip into and pull money from as it is just readily available without the need to swipe the credit card. 

I use the below template for tracking:

Sinking fund came to my rescue and has been my saving grace. I have enough breathing room and I no longer need to worry about future bills anymore. I have also learned to ditch the guilt whenever I feel the need to reward myself with “things.” 😊

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