And How To Use Them
Sinking Funds 101
What Are Sinking Funds
How Many Sinking Funds Do You Need
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What Are Sinking Funds?
You may ask, " What are sinking funds?" Sinking funds are a way to save money for future expenses or unseen events. Let's say you're looking to save for a down payment on a new car; you will set aside x amount of money until you reach your goal(how long it takes to reach your goal depends on you and your financial situation).

Now you may ask, how many sinking funds should I have? This will look different for everyone; I may have 10 sinking funds, while you may only have 3. Depending on your finances, and goals; I suggest for smaller budgets 3-4, for larger budgets, the sky is the limit(but try to keep it reasonable).
What Can Be A Sinking Fund?
Sinking funds can be whatever you want them to be. Here are a few examples:
car maintenance
vacation
birthdays
Christmas
emergency
back 2 school
retirement
eyeglasses
If you love buying perfume(which can be very expensive) and you're always purchasing it when it's not in your budget, then setting up a sinking fund would be the best idea. If you struggle with impulse shopping, setting up sink funds will help with your impulse shopping. Implementing sinking funds into your budget will help you shop and spend with control intent.
What Are Sinking Funds?
When adding money to your sinking fund; you can do this weekly, bi-weekly, monthly, or quarterly(this is 100% up to you). Also sinking funds can have a specific amount and end date(again this is up to you).
Are there Pros & Cons?
Yes, there are always pros and cons to everything we do. Deciding if sinking funds is right for you depends on your finances and financial goals.
Pros:
avoid debt
improve budgeting
spend with intent
provides peace of mind
Cons:
requires planning
requires discipline
risk of misuse
doesn't stick to it
In conclusion, sinking funds are a practical and effective way to prepare for future expenses, help you avoid debt, and maintain financial stability. While it requires discipline and careful planning, to me the benefits of having money set aside for specific goals outweigh the cons. By incorporating sinking funds into your budget, you can easily achieve your financial goals and peace of mind.
What sinking funds will you be implementing into your budget? Leave your answers down in the comments!
Disclaimer: I am not a licensed financial advisor or credit consultant. The information presented in this blog post is based solely on my experiences, and should not be considered professional advice. Implementing the shared information is at your discretion, and I can not guarantee any specific results. Also please be aware that links in this blog post may be affiliate links, meaning I may earn a small commission if you purchase through those links, This commission helps support this page at no extra cost to you.
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