- Sinking Funds (Other Savings)
- “Money Regrets” Budget
A sinking fund happens when you systematically save for an expense that doesn’t occur every month. For example, let’s say you plan to spend $1,000 on Christmas and it’s the beginning of March. You have 10 months to save, so if you put aside $100 a month to be able to pay for Christmas with cash, then that is your Christmas sinking fund. If you save $90 monthly for the car insurance bill that is due in six months, then that’s your car insurance sinking fund.
It’s your choice where you put the actual money as you build a sinking fund. It can be a simple savings account at your bank or cash in a cookie jar. The important thing is to make sure that you separate it from your other money so that it doesn’t get spent on something else.
As you make your budget, look a few months out and see what expenses are coming that need a sinking fund, then build those into your monthly budget so they don’t sneak up on you.