sinking funds

  • Have you ever been in that stage of life where a major emergency hits and you feel totally unprepared? This was basically how Tom and I lived our lives for years. We let ourselves be blindsided by everything from vet bills, to car repairs, doctor visits, holidays and even some random kid’s birthday party. Something would blindside up and we were left scrambling to find the funds to pay for it. This meant we usually turned to our credit card…because it was for emergencies after all. The sad thing was, most of these things weren’t actually emergencies. We knew the holidays were coming, we know our car will have problems eventually. Kids get sick. Pets get sick. None of these things are all that surprising. So how do you prepare for the expected unexpected? Sinking Funds! I’ve got a Sinking Funds tracker to help you plan for life’s unfortunate events so you aren’t left in a financial panic.

*This post contains affiliate links through which I may make a commission. All thoughts and opinions are my own. 

What are sinking funds?

Sinking funds are basically a super smart way to get intentional with your savings. There were so many times I have personally felt overwhelmed because I didn’t plan enough.

  • Car tabs
  • Christmas
  • Car repairs
  • Birthday parties
  • Vacations

Now that I understand Sinking Funds and I use a Sinking Funds tracker, I never have those major moments of stress. 

Sinking Funds for the holidays

For the last two years, at Christmas (since we’ve started sinking funds) Tom and I set aside $100 starting in August. This gives us $500 to spend on gifts, outings, and cocoa at Christmas time.

More than ever we often use our Christmas fun to find Non-Toys ideas for our kids and we look for events and activities that we can do together as a family.

Starting your Sinking Funds

For our Sinking Funds, we use a mini accordion file folder. Each section is designated for a different financial purpose. Right now we have Christmas, car maintenance, car tabs, and Destiny (our oldest daughter has prescriptions, contacts and school always comes up with some new fee). I also use this same folder to section off the money we budget for our groceries for the month.

It is so handy to have everything in one place where it is easy to keep sorted. I also like using labels to keep track of each individual fund. Labels are helpful because I can make my own and mix and match as the year changes. You can snag our FREE Sinking Funds labels below.

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How to calculate Sinking Funds

  1. To figure out how much money you need to set aside each month, use this Sinking Funds track that makes it super simple.
  2. Start by creating a list of your upcoming expenses in the category column.
  3. Next, make a note of the amount you will be needing to save.
  4. After that, write down how much months you have until you are going to need this money.
  5. Then, finally, take the amount you need and divide by the number of months you have before you need it.
  6. Get your grand total of how much money you will need to save every month in order to save enough for each purchase.

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Here is a total breakdown of how Sinking Funds work, plus a Sinking Funds tracker to help you plan your budget and stay on track.
Take advantage of this Sinking Funds tracker to help you manage your money and simplify your saving.

Dividing by paychecks

Ideally, you will want to take each amount and divide it by the number of paychecks you have to save. So for car tabs, you need those in 3 months and you need $150. Well, in those 3 months, you should receive 6 paychecks. So for each paycheck, you will be setting aside $25.

For the larger ones, like $1,000 needed for vacation, you have a little more time. In 7 months you will have received 14 paychecks (give or take.) So you will take $1,000 divided by 14. So in 7 months, if you want to save up $1,000 for vacation, you will need to set aside $70 per paycheck.

What if you don’t have enough?

The tough truth is, if these are all things that you need then you are going to have to find that money somehow.

Making your budget work for you

Then there are the things that you don’t need. For example the $100 birthday fund. If you are planning a party for a child, hit up Little Ceasars for some $5 pizzas, buy a cake mix from the store and bake it with your little one.

I can’t tell you the amount of joy and pride a kid is capable of feeling after helping make and decorate their own birthday cake. Now maybe you can shave that $100 back to $50…or even less.

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You’ve Got This!

Starting any new venture can be kinda scary, but I promise this one will pay off and reduce your money panic attacks! Now Sinking Funds are something I can’t imagine our family living without. I have so much confidence in it this method that I have actually started a super one for Destiny now that she has officially joined the workforce. I want to instill these good saving and budgeting techniques in her and our other kids so that they can avoid some of the serious financial downfalls tht we have had to face. I want you to avoid them too!

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Here is a total breakdown of how Sinking Funds work, plus a Sinking Funds tracker to help you plan your budget and stay on track.

32 COMMENTS

  1. Courtney | 16th Nov 17

    These are great tips! Thank you!

    • heartsoulwhole@gmail.com | 16th Nov 17

      You bet! So glad you liked them!

  2. Jen | My Healthy Homemade Life | 16th Nov 17

    We do this but I never realized there was a name for it! While I don’t always stay on track with it, when I do, it helps tremendously! Are you keeping all the cash in the accordion file? We’ve been putting it in savings but with a lot of categories, it’s time consuming to keep track of when all the money is in one account.

    • heartsoulwhole@gmail.com | 16th Nov 17

      Yeah, we keep it all in a file. It helps me to see and touch the money. I like the idea of separate categories in savings. For me, I’ve realized I do the best when it’s more hands on. That’s why we even take our grocery budgeted money out. Otherwise I tend to just keep on spending!

  3. Lindsay | 16th Nov 17

    I love your blog Renee!!

    • heartsoulwhole@gmail.com | 16th Nov 17

      Thank you Lindsay! It means a lot!

  4. IrieDiva | 16th Nov 17

    this is definitely an awesome way to come up with the much needed money for things like christmas which i am currently wondering where it will come from!

    • heartsoulwhole@gmail.com | 16th Nov 17

      I have been there! Setting aside money all year long for Christmas has been such a weight off my mind. Car tabs and Christmas!

  5. Marcie | 16th Nov 17

    This is a great way to keep on top of personal finances. We struggle too with limiting the amount we spend on gifts, but it saves SO much when we do!

    • heartsoulwhole@gmail.com | 16th Nov 17

      I know…it can be tough creating new habits, but so so beneficial when you can stick to them.

  6. Jaime | 16th Nov 17

    This is such great advice. We recently completed a similar exercise at home and it was so interesting and insightful to see where our money was going – and where we could cut back. Definitely keeping this in mind, especially with Christmas coming up!

    xo Jaime
    Angloyankophile

    • heartsoulwhole@gmail.com | 16th Nov 17

      I never thought I would be this type of person but it’s really freeing…in a very limiting way! haha

  7. Theresa Bailey | 16th Nov 17

    I just started doing this a month ago. I really like your ideas on how to keep it organized.

    • heartsoulwhole@gmail.com | 16th Nov 17

      Oh awesome! Good luck as you continue!

  8. La Shell | 16th Nov 17

    Boy I wish I had this when I just started to work. I remember spending my entire first few salaries on clothes and shoes. So embarrassing when I ran out of cash before my next pay day. Great article!

    • heartsoulwhole@gmail.com | 16th Nov 17

      YUP!!! I am right there with you! $500 gone in a weekend! What a waste.

  9. Tanvi Rastogi | 16th Nov 17

    We do this too … but didn’t know this is what it was called – Having a budget and savings for different things gives me such peace of mind.

    β₯ tanvii.com

    • heartsoulwhole@gmail.com | 17th Nov 17

      It absolutely does! I’m glad you are benefiting from the process. No matter what it’s called!

  10. Polly | 17th Nov 17

    You mentioned so many great tips! It’s so important to manage finances and unfortunately this is something I wasn’t taught in school. Now that I’m a homeowner and mother, taking care of my finances is a must!

    • heartsoulwhole@gmail.com | 17th Nov 17

      Absolutely. I wish I would have started sooner as well!

  11. caren | 17th Nov 17

    Okay, I love this idea, and I also love the idea of finding sources of funds around the house! I was listening to the stacking benjamins podcast this morning and they interviewed the founder of http://www.decluttr.com/ which is like a lazy man’s ebay. Just another idea to check out.

    Love your blog!! It’s beautifully done. You’ve inspired me to up my game a little πŸ™‚

    • heartsoulwhole@gmail.com | 17th Nov 17

      Oooo I will be checking out that site! Thanks for sharing. So glad you enjoy the blog…takes a lot of work and effort, I tell ya. Whew!

  12. Vidya Tiru | 18th Nov 17

    great info and tips…thanks . will also help in teaching the kids more

    • heartsoulwhole@gmail.com | 18th Nov 17

      I’m hoping so! Thank you Vidya!

  13. Chris | 18th Nov 17

    Great tips! It’s so simple, yet I have never thought of implementing these. It’s so easy to get lost in the consumption!

    • heartsoulwhole@gmail.com | 18th Nov 17

      It definitely is! This method has worked so great for me and my family!

  14. Latasha (@ArtsandBudgets) | 18th Nov 17

    Love the tips in this post. πŸ™‚
    Budgeting is so needed to stay ahead! Thanks for sharing. πŸ™‚

    • heartsoulwhole@gmail.com | 18th Nov 17

      Absolutely! I always thought I would feel constricted but it’s quite the opposite!

  15. Nadalie Bardowell | 18th Nov 17

    I absolutely love your info graphics and labels. They are quite catchy and simple but do the job! It’s a very good idea to organize and create a budget especially around this time of year, it can be easy to lose track of where the money is being spent.

    • heartsoulwhole@gmail.com | 18th Nov 17

      Thanks so much! I really try to go simple without boring. I appreciate the compliment!

  16. Aarika | 20th Nov 17

    This is such a wonderfully informative and detail`ed post. Thank you! I learned TONS about saving money using Sinking Funds. Love it!

    • heartsoulwhole@gmail.com | 20th Nov 17

      I’m so glad you found it beneficial! It has helped our family so much!

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