I'm on FB group where there has been a lot of discussion about sinking funds. The definition they gave is 'saving a small amount of money each month for a certain amount of time before you make a purchase'. That definition is true, but a bit vague since it doesn't really explain the types of things you use sinking funds for.
I have used sinking funds (sometimes I call them escrow funds) for car registrations, Christmas, auto insurance for a very long time. I established these pretty early on. I wanted to get a discount for paying insurance semi annually. The only way to make sure I had the funds was to save for it. A little each month.
Specifically, I save $50 a month for Christmas. I guess I do have a birthday fund now too. I save $42 a month in that one. I also save $152 a month for car registrations, auto insurance and renters insurance.
Now that we use YNAB, I have quite a few more sinking funds. I don't always add to them all every month. For example, I know that my daughter has a fair share for band expenses due in the fall when marching season starts. It's usually around $300. I could save $25 a month, but that feels tedious to do all year long. So for the last couple months, I have been just putting various amounts in knowing the goal is to have all the money by August. I actually need to make a $75 payment to them tomorrow. And I do have that.
I established an eye care fund, as nearly all of us are due (over due actually) for eye exams and will need glasses. And I also established a cell phone replacement category. So far I have funded it well enough to purchase two new phones. My older daughter and I are holding out even longer with phones we bought 3 years ago. My does randomly turn off and on by itself sometimes, but she hasn't had any problems with hers.
Do you have sinking funds? What do you use yours for?
Sinking Funds
May 31st, 2017 at 10:55 am
May 31st, 2017 at 12:34 pm 1496234085
May 31st, 2017 at 01:49 pm 1496238585
20 years ago my sinking funds were just for auto and rental insurance. Didn't have a lot of expenses.
These days my sinking funds are for property taxes, insurance (home, life, disability, auto x 2) vacation, car repairs, dentist, and "other". Other is misc. spending that just doesn't happen every month.
May 31st, 2017 at 01:51 pm 1496238718
May 31st, 2017 at 02:45 pm 1496241953
May 31st, 2017 at 03:07 pm 1496243224
May 31st, 2017 at 03:58 pm 1496246301
May 31st, 2017 at 04:39 pm 1496248785
May 31st, 2017 at 04:43 pm 1496249028
@CB, nice plan. When we owned a home that didn't require escrow we saved for our own property taxes, too.
May 31st, 2017 at 05:54 pm 1496253297
@DebtfreeThirty,it is a skill that is helpful to understand how much money is really yours each month to put towards debt or savings. If you are saving year round for the items that are not regular, it basically puts it into your budget to see how much those irregular expenses are part of your budget. I've been in the save up fast for the glasses and the tuition bill, so I get that part too. Definitely start with one or two categories first. Once those are habits add the others in.
June 3rd, 2017 at 08:34 pm 1496522060