You can use your sinking fund to help pay for predictable expenses. This money will help you avoid debt or dip into your emergency fund if you need to make a large purchase. Set up a separate savings account for sinking funds, and set up automatic withdrawals to build up your balance. Here are some tips to get you started. Read on to learn how to set up a sinking fund for any large expenses you may have. This will make your budgeting process a lot easier.
Set up a separate savings account for sinking funds
Sinking funds are used for a variety of purposes. They help you save money for things that are outside of your normal budget. Sinking funds are often used to pay off yearly or quarterly bills or other large one-time expenses. You can even use them for unexpected expenses such as a car repair. Here are some of the reasons why you should set up a sinking fund:
Sinking funds help you reach your goals by erasing any feelings of guilt or regret over big purchases. These funds allow you to pay a smaller amount every time you want to make a large purchase, making a big purchase less intimidating. A sinking fund is an excellent way to reduce the use of credit cards and personal loans for big purchases. So, set up a separate savings account for sinking funds.
Establish automatic withdrawals to build up funds
Setting up an automatic withdrawal from your checking account can help you save money for an emergency. Most banks have automatic transfer options for this purpose. Try Chase’s option, which automatically deducts $25 from each deposit of $250 or more. You may want to establish multiple accounts to build up a larger sinking fund. Just make sure you keep track of contributions made to each sinking fund goal or project. If you accidentally spend funds in a sinking fund, you will quickly discover that you have more money than you thought.
Once you have established automatic withdrawals, make sure you review your spending habits every few months. You might find yourself overspending just before your vacation. A car breakdown could leave you with an expensive bill. Maybe your air conditioner breaks during a heat wave. Or, Christmas may sneak up on you, just as you were paying for gifts. Whatever the reason, having a sinking fund is a great way to be prepared for unexpected expenses.
Reduce spending by canceling or renegotiating expensive subscriptions
One way to save money is to stop paying for subscriptions. These payments can add up quickly, especially if you have lost track of them. Subscription management services can help you manage these payments by cancelling unwanted subscriptions and negotiating better rates on bills. These services do not handle mobile apps or games, however, so you’ll have to manually manage each one. Here are some ways to manage your subscriptions and save money:
Try canceling your daily newspaper. A daily newspaper subscription can cost anywhere from $480 to a thousand dollars a year. Alternatively, consider switching to a digital-only subscription and save up to $500 a year. You might even be able to negotiate a better price for a few months before canceling, and then switch to a digital-only subscription if you’re unhappy with it.
Save for one-time expenses by setting up a sinking fund
One-time expenses are the type of expenditures that you cannot afford to pay for in a lump sum. Often, you have limited disposable income and may have to use your credit card to cover the costs. To prevent this, it is a good idea to set up a sinking fund and set aside a certain amount every month until the expense is paid in full. You can incorporate the sinking fund into your monthly budget by setting aside $100 per month for at least eight months.
When you set up a sinking fund, you can allocate a certain percentage of your income to each category. These funds can be used for a variety of different purposes. They are useful for avoiding debt for purchases or bigger bills. By putting aside a certain amount of money every month, you can pay for a one-time event without racking up a high credit card debt balance.