Sinking Funds

Do you use ‘Sinking Funds’?

To be honest, it’s taken me awhile to start using sinking funds. At the beginning of my debt-free journey, I was so caught up with the immediate that I didn’t consider more long-term budgeting. Sometimes I would think, “Hey, I should start setting aside money for X, Y, and Z,” but I never followed through. Thankfully, my short-sightedness didn’t cost me too much – but it did cost me some.

About a month ago, I started really looking at my overall budget. I had been trying to save more, feeling like I should have an Emergency Fund to cover at least 1 month’s expenses instead of just $1,000. And I was just about at that goal when I started thinking, “Maybe I should throw this ‘extra’ at my debt,” instead of letting it sit in my savings account. I went back and forth for about a week – one day thinking, “Yes – throw it at the debt!” and the next reconsidering and thinking about building up a more substantial Emergency Fund. [Mainly because it seems to me that when Murphy comes calling, he likes to bring at least a few friends along.]

Then, a thought occurred to me. I had upcoming expenses that I could use that savings for – just like a sinking fund. I knew I would want some spending money when I travel to see my sister and her most wonderful baby over Spring Break. I’m planning to drive across the country this summer [instead of flying] to visit my parents. And of course, I always spend a lot of money in August getting ready for the new school year. [The plight of a teacher.] Plus, Christmas will be coming around again, and as Dave says, “Christmas comes every year. It’s NOT an emergency.”

So, I created this tracker inside my Google Sheets Budget Spreadsheet. I will admit, I keep tweaking my ‘budget’ for each of these upcoming expenses, mainly because I don’t want to spend this much. However, I do much better by trying to ‘beat’ my budget – ie, not spend the full amount – than I do on trying to ‘meet’ a smaller budget. Plus, I’d rather have too much saved for an event than not enough.

Since I only get paid once a month, I don’t get the satisfaction of making lots of payments towards my debt. But I find that I really enjoy adjusting my budget and my future plans, and that helps keep me motivated. I’m excited that for the first time EVER, I am planning ahead for things that I KNOW I will need money for in the near future. It gives me such a feeling of power over my own finances.

Do you use sinking funds? Why or why not?

The Intelligent Zebra