After publishing an earlier post exploring the benefits of sinking funds, I received some inquiries into how I utilize this principle in my own budget. So, today, I’ll be breaking down my sinking funds, detailing everything from their categories to their goal balances.
When I first began using sinking funds, I included four in my budget. Over time, this number has grown, and I currently have ten: birthdays, Christmas, electronics, fun, giving, investing, medical, moving, vacation, and weddings. Remember, sinking funds are fluid; they can and should be adjusted, added, and eliminated as your needs change.
I don’t have a set amount that I contribute to each fund, nor do I contribute to all of them every month. Instead, I fund them on an as-needed basis, assessing my needs and priorities each time I create and close out my budget.
A Closer Look at My Sinking Funds
Birthdays (Goal Balance: $300)
I decided to create a sinking fund for birthdays about a year ago, after treating a friend to a celebratory dinner. The meal cost about $50 total—not outrageously expensive, but a large enough portion of my discretionary spending budget that I decided to make a change. Now, I keep $300 set aside so that I’m able to treat those I love to a nice meal or a thoughtful gift, without worrying about how it will affect my regular spending.
Christmas ($600)
Before I began using sinking funds, I’d always stress about all the spending I’d rack up throughout December. Now, I look forward to the holidays, knowing that I’ve set aside all the money I’ll need for gifts, decorations, travel, activities, and more. I usually spend about $500 each year on Christmas-related expenses; by saving $50 each month, I feel confident that I’ll have enough when the season rolls around.
Electronics ($2,500)
While I’d certainly be able to survive if something were to happen to my phone or my computer, it wouldn’t be pleasant—which is why I created a sinking fund to save for future replacements. I’d like to have around $2,500 in this fund, which would be more than enough to replace my laptop, cell phone, or tablet when necessary. (It wouldn’t be enough to replace all three at the same time, but, hopefully, I’ll never be in that situation!)
Fun ($1,000)
My favorite sinking fund is my “fun” fund, which allows me the chance to treat myself should the opportunity arise. In the past, I’ve used this to make purchases that wouldn’t necessarily fit into my budget, but that have the potential to (I think) really enrich my life; I’ve used it for everything from tickets to concerts or Broadway shows to a new pair of nice (and somewhat pricey) boots. Some people may find this fund frivolous, but it’s been a life (and budget) saver when it comes to fighting frugal fatigue.
Giving ($300)
I also created this fund about a year ago, when a friend of mine was participating in a charity walk and I made a donation to their team. Much like with the birthday fund, I realized that I wanted to be able to give freely when opportunities came up, without having to worry about my regular monthly budget. By aiming to keep $300 earmarked for giving on hand at all times, I feel like I’m in a good position to help causes and people I care about throughout the year.
Investing ($1000)
I’m currently in the very early stages of learning how to invest, and I’m working on saving up $1,000 to help myself get started. I haven’t yet decided where I’ll be putting this money—it might be in apps like Robinhood or WeBull, or it might be in an index fund. (I also haven’t yet decided if I’ll keep this fund around once I take those first steps; I may eliminate it and instead add an “investing” line item to my monthly expenses.)
Medical ($10,000)
My health insurance premiums are relatively cheap, but they come with a trade-off: a high deductible. Like, a very high deductible. Because I’m generally healthy, I’m okay with this, but I am working to build up a medical sinking fund that will have enough money to cover my deductible, as well as any co-payments for appointments, medications, etc. I don’t want to find myself in a terrible accident, and, on top of everything, scrambling to cover my portion of the bill! This fund also includes money designated for dental and vision costs, such as annual or semi-annual exams, since I don’t have insurance in either of those categories.
Moving ($10,000)
Moving is expensive. Moving in New York City is even more expensive. I’m fortunate that I’ve been in the same apartment since I moved here, but that won’t always be the case—and I want to be prepared for when that day arrives. Moving is stressful enough, and having a solid chunk of change set aside to help me cover broker’s fees, application fees, security deposits, movers, etc. ensures that I can focus on things other than finances while going through the process.
Vacation ($2,500)
I don’t really take vacations (or, at least, vacations that require a lot of money), but I would like to—someday. So, I’m putting money aside, little by little, to help cover those costs. I’m not planning anything particularly lavish, so I feel like $2,500 should be enough, but I will, of course, revisit and revise this amount as needed. I’ve also been known to utilize separate funds for specific trips that I have planned that aren’t necessarily “vacations,” (as you’ll see below), so this account is really designed to save for a trip that’s purely recreational.
Weddings ($3,000)
I was originally slated to attend a wedding in Texas this year, and created this fund to help cover those costs—airfare, hotel, etc. With a few other weddings on the horizon, I decided to save $3,000, feeling that this amount would cover the trip to Texas as well as wedding gifts for those remaining (and more local) affairs. Of course, the wedding in Texas was cancelled because of the pandemic, but I’m keeping this money set aside for now, in case the couple plans something for 2021 or beyond.
Big City, Small Budget 