Sinking Funds For Beginners

ARREST YOUR DEBT AND BUILD YOUR FUTURE! SINKING FUND STRATEGIES FOR BEGINNERS Before deciding to actually set up one of these funds, it's important to know their purpose. In simple terms, the sinking fund definition is: "A fund where a person sets back a certain amount of money over time in order to use it for future expenses." Each sinking fund serves a unique purpose. They can be for something specific, like an event or future purchase, or they can be set up for any unexpected situations that might occur. HOW DO SINKING FUNDS WORK? It's also important to understand how sinking funds work. Basically, you set aside money every month for a certain goal. I will calculate them later in this article, but w to understand it's important to set goals and boundaries. WHAT'S WITH THE NAME? While the word sinking has a negative connotation, it actually has to do with sinking or decreasing, the amount of debt you owe or might owe in the future. If you use this type of fund correctly, it can really make life a lot easier. HOW TO MAKE A SINKING FUND FOR BEGINNERS Think about your own life and the typical financial emergencies you experience. This can be anything from vehicle maintenance, air conditioning repairs, you name it. Keeping sinking funds separate from your regular money will help you create better financial habits. Once you know what you want to save towards, decide how much you are willing and able to delegate into this fund or funds each month. Think of them as monthly bills that you have to раy. HOW MANY SINKING FUNDS SHOULD I HAVE? VACATION FUND FUN MONEY FUND KIDS SCHOOL FUND EMERGENCY FUND VEHICLE FUND This is where the personal in personal finance comes into play. You may not have the same funds that I do - and that's OK! Large And Planned Purchases Small And Planned Unexpected Expenses Forgotten Expenses Purchases HOW ARE SINKING FUNDS CALCULATED? Basically, there are 2 main ways to figure out how to do your calculations. The first way is by seeing how much you want to put into each target and how long you have to do it. You'll then divide these numbers. SINKING AMOUNT TIME FUND EXAMPLES/TYPES OF SINKING FUNDS House Medical Car Vacation Holiday sinking fund THE BEST ACCOUNTS TO KEEP YOUR SINKING FUNDS While it's ultimately up to you, we're going to take a look at 5 different types of accounts you can put the money in. These are: • Certificates of deposit (CD) Money market accounts • Normal savings account • Completely separate savings account