Important Sinking Funds We All Need In Our Budget

If you know it’s coming…prepare!

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Why Bother?

In short, because there are certain aspects of your financial life that are just inevitable. Knowing this, the responsible thing to do is prepare so that you can keep your monthly budget intact and stay on target with your financial goals.

(If you need a deeper understanding of sinking funds in general, check out my article defining the term here – Click Here)

Important Sinking Fund #1: Holidays / Celebrations

What is one thing we all know is coming at the end of every year? The thing that can pull the carpet right out from under our finances and cause us to enter the new year on unstable financial ground?

The holidays.

It seems like somehow we’ve managed to cram a lot of celebrating into one month. And you’ve got to be ready for this financially.

If you’ve set up your budget correctly, so that every dollar has a job every month, and you’ve left out factoring in the “holiday spend”, then you will be forced to make big budget changes to accommodate. And you knew it was coming! Don’t let this happen.

My wife and I put away a certain amount of money each month in preparation for the holiday season and other celebrations. So if a birthday party pops up along the way, we’ve got a little piled up for the gift. Or if we’re hosting a celebration of some sort, we’ve got funding for that without digging into our monthly food budget.

Sometimes we go months without tapping into this fund. That’s great, because it just piles up. And then, of course, when the big holiday season inevitably comes, we’re ready. Don’t miss this obvious chance to prepare for one of the biggest spending months by spreading that “spending” out over the whole year.

Important Sinking Fund #2: Vacation / Travel

Another budget buster for us in the past has been vacations and traveling. If you aren’t prepared for these events, even the smaller trips, the costs can add up fast.

Now, maybe your family is not a big traveling family. That’s okay. But, chances are you will eventually travel somewhere. Maybe for business, maybe for health reasons, or maybe an impulsive weekend getaway. Wouldn’t it be nice to be able to reach into a pile of money and pay for whatever your travel ends up being without blowing the current month’s budget?

Let me answer for you – Yes, it is very nice. My job has me traveling quite a bit, and this sinking fund is a budget saver.

Important Sinking Fund #3: Basic Home And Auto Maintenance

If the first two were planning for the obvious “fun” parts of life, this will address the “less fun” aspects of adult life.

The fact is, things break. Oil must be changed, tires rotated, and retaining walls repaired. You don’t want to be dipping into the emergency fund for things that aren’t technically emergencies.

You know that owning automobiles and a home is going to mean basic maintenance and repairs. Prepare for these things so that you can protect your budget and use your emergency fund to protect you when you really need it.

Bonus!

Speaking of an emergency fund…

If you don’t have an emergency fund in place, you really need to set that up first. If you already have some sinking funds, boom, now you don’t. They just became part of your emergency fund. You can start those up again once you’ve got that thing fully funded.

Don’t skip this! Without an emergency fund, there is nothing between you and a financial crisis. Do yourself, and your family, a favor and get this set up.

Once you do, get started on these sinking funds! You’ll be glad you did!

And as always, regardless of your money goals, you can “Bank on a Budget” to get you from where you are to where you want to be!

You know that owning automobiles and a home is going to mean basic maintenance and repairs. Prepare for these things so that you can protect your budget and use your emergency fund to protect you when you really need it.

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Alex

Hello, my name is Alex! I'm a public school teacher who has achieved some big financial goals just by getting control of my money using some simple strategies like using a monthly budget. Now I'd like to share what I've learned with you. Welcome to "Bank on a Budget!"