Do you wish you had more money set aside?
She had a plan.
Its called setting up a sinking fund.
How much should you have in your emergency fund? Some experts recommend saving 12 months’ worth of living expenses. Here’show to get started.
What Is a Sinking Fund?
The term sinking fund comes from corporate finance lingo.
Our team has compiled alist of creative waysyou can fatten your bank account this week.
This is a long list, so dont get overwhelmed.
Well keep it updated as offers changes or expire.
But you dont have to own a business to benefit from this money-saving strategy.
Why Do I Need a Sinking Fund?
Here are a few reasons to start a sinking fund account.
Sinking Funds Can Help Weather the Storm of Variable Income
Sinking funds make upcoming expenses more manageable.
Sinking funds are also a lifesaver if you have variable income.
It can be tough to budgetif your income fluctuatesfrom month to month.
These can include:
Do your best to estimate how much youll need.
Reviewing your past spending in these categories can help.
They are not the same thing and ideally should be kept in separate savings fund accounts.
Sinking funds are for planned expenses you’re able to anticipate.
For example, youd use your sinking fund money on plane tickets to visit your mom for the holidays.
First, you should probably figure out the total amount you want to save.
Then divide that number by the amount of time you have until youll need to spend the money.
If math isnt your strong suit, you could use one of the onlinesinking fund calculatorsto figure it out.
Since sinking funds typically cover short-term savings goals, youll want to be able to access your money easily.
Keep it in ahigh-yield savings accountormoney market accountwith attractive interest rates.
Those who prefer theenvelope methodmay keep their sinking fund savings in cash.
Youll get hit with penalty fees by taking your money out earlier.
5 Tips for Success With Sinking Funds
Become a pro at using sinking funds with this advice.
Apply Windfalls to Sinking Funds
If you receive extra money such as a bonus or tax refund dont wait.
Add it to your sinking fund today to accelerate your progress toward meeting your financial goals.
Prioritize needs like taxes and insurance bills over wants such as vacations or holidays.
And know you dont have to save up for everything all at once.
Establish a plan for reaching your money goals that is feasible for you and your financial situation.
Kaz Weida is a senior writer at The Penny Hoarder.
Nicole Dow is a former senior writer at The Penny Hoarder.
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