Sinking funds are a great way to save for something that often catch us off guard, such as car repairs, house maintenance, even Birthdays. In this blog post I will be sharing my top 5 sinking funds that I use every year and how I use them.
I hope this blog post inspires you to start using sinking funds and allows you to save even more money.
Why Are Sinking Funds Important?
Without sinking funds I would have no other money saved. They take the stress out of budgeting, I use them all year round this means I am only putting small amounts of money away each month for it to build to my desired goal.
I use sinking funds all year round, depending what I am saving for I save for 12 months and sometimes it can only be 3 months. They are great for any unexpected expenses such as car repairs, or even you water boiler not working. Having the money there is a huge help.
You can either use cash envelopes to save for this or use online banking. I use Monzo for my sinking funds and for me this is the most effective way. I have 20 sinking funds at the moment and a lot of these are in preparation for 2021! Yes I know I am too prepared!
5 Sinking funds you need to smash your budget!
Car Repairs: Car repairs are the bane of my life, having money put away allows me to pay for any car repairs without using my credit card or borrowing money.
Emergency Fund: I have just started to save for my emergency fund, this money will be used if I loose any income. This money is not to be used to buy myself things but if an emergency arises.
Christmas: I save for Christmas all year round, in December 2020 I will put money away for December 2021, having this sinking fund has allowed me to have more then enough money saved to buy presents. And have money leftover to use over the Christmas period.
Birthdays/Gifts: This is just like my Christmas fund, I save all year round for birthdays and other gifts. This means that I have money on hand for Birthdays throughout the year.
Holidays/Days out: This is one of my favourite sinking funds. There is no better feeling then enjoying a holiday that you have saved up for without using credit cards pr borrowing money. I also use this pot to pay for Dates and other days out that are outside my budget.
These aren’t the only funds I have, I have 20 in total that I use throughout the year, you can have as many or as few as you like. Did you see a nice handbag but its a bit out of your budget? Then create a sinking fund and save for it. It is such an amazing buying something that YOU saved for.
Other ideas for sinking funds:
- New Computer
- Moving house
- New car
- School uniform
How Do I Fit Sinking Funds Into Your Budget
Before you start using sinking funds you need to fit them into your budget.
The best way to do this is work out your goal. For example if your saving for Christmas work out how much you would like to spend per person and then work out the total amount.
Each person = £40 x 10 people = £400
Then decide how much you need to save each month.
£400 dived by 12 months = £33.33 per month (I would round up to £40)
Once you do this you will be able to budget for this.
You can also use saving challenges to help fund these as well.
I hope these tips will help you create your own sinking funds and improve your budget!
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