Budgeting isn’t just about making sure it’s sufficient to pay your bills each month. It is also about planning future expenses in the future. You need an emergency fund, but a wise way to save money each month is to set up different sinking fund categories.
By sinking your funds, you can put your money aside every month for certain things.
In this article, you will learn about different types of thinking fund categories. These will help you build your budget and negate your debt.
Why is the category of subsidence funds important?
According to PR Newswire, 80% of Americans have a budget.
But many don’t save enough money. In fact, YouGov said 12% of Americans surveyed said they had no savings, while 27% claimed their savings were under $1,000.
The purpose of the Sinking Fund is to save cash for certain costs. This includes one-off or irregular costs. Cash should ideally be divided into categories.
For example, if a wedding comes along instead of using a credit card, you can understand how much you need for related expenses. Divide that amount by the months leading up to the event. Next, we aim to save that total every month with the Wedding Budget Breakdown Fund.
Setting some options from the Sinking Funds list will help you avoid spending money on the wrong priorities. Each month, you can focus on saving certain amounts for specific purposes.
One of the benefits of sinking funds is that you don’t have to pay for things at once. By spreading costs, you can reduce the pain of major costs and stop them from entering different types of debt.
You set aside money from your salary every month (or frequency you decide) towards certain financial expenses. That’s to ensure that when big events, repairs, or other expensive items appear, don’t go beyond your budget.
Rather, you can slowly save money for future expenses and prevent long-term debt from undertaking. An alternative for many people is to pay with a credit card, and high interest rates will make the amount you owe.
Establishing a sinking fund with a specific category will help you take your budgeting skills to the next level. Rather than dumping the remaining cash into your savings account, you will be forced to further itemize your monthly budget. All savings goals can have their own sinking fund.
We know we need to create sinking funds, but is it clear about the category of sinking funds that we need? Here’s a list that will help you plan!
18Fund Categories to Review
There are many sinking fund categories to choose from. And you’ll probably think of a few more besides what we include here.
They can include not only the parties, but also annual costs, emergency bills, car costs, appliance renewals, wedding costs (which may be expensive).
Please note that subsidence funds are only part of the overall budget. Budgets have several different budget categories that help you plan your finances overall.
That being said, here are some of the more general sinking fund categories you can incorporate into your budget:
1. transportation
One of the biggest costs outside of housing is transportation. Whether you own a car, employ public transport or use Uber on weekends, it’s important to budget for transportation costs.
If you own a car, you can set up a sinking fund to pay for the cost of your car, maintenance, and unexpected car repairs. New tires and other replacements for your vehicle can pull back at least a few hundred dollars (at least).
Your Auto Subsidement Fund includes vehicle registration fees, parking permits and money intended for car insurance. You can even save up money to buy a new car in the end (which car should I buy?).
And for those using public transport, you can take money for train and bus passes and apps on board.
2. Medical expenses
Another category of sinking funds that will establish is medical expenses. Visiting a doctor is expensive, especially in emergencies.
In fact, more than half of the Americans surveyed have medical debt, according to affordable health insurance.
Even good health insurance is important to set up a medical flexible spending account (“What is a flexible spending account?”) or a health savings account (HSA). It can be used as a medical sinking fund to avoid falling into debt due to medical expenses.
3. Christmas and winter holidays
Christmas is a great example of sinking the category of funds that comes every year. Unfortunately, many people don’t prepare in advance, eat up their budgets and pay on holidays.
No matter how much money you spend on Christmas, Hanukkah or other major holidays, the sinking fund category for them can ease the pressure of that time. This is a savings goal with certain deadlines each year. So you can follow the Sinking Fund Savings Plan all year round or use the Christmas club.
Decide how much you plan (or can) on your holiday. If you plan to save money each month, divide that amount by 12. (If you start after January, simply divide the amount of money by the remaining months.)
If you’re going to see your family, don’t forget about decorations, office gifts, Christmas dinners, travel expenses and more. They can go beyond your typical holiday gift budget.
You may still encounter unexpected costs. However, by setting up a Christmas-specific sinking fund, you can incorporate Christmas into your monthly budget throughout the year.
4. vacation
Another good example of the sinking category of funds is vacation. Every few months, you hit the road and plan big annual trips and other vacation patterns, planning is important. Budgeting for hours a few months ago will make you even more prepared and avoid taking on debt.
If you are planning a trip to Disney World on your budget or Europe, it can be a big life event. And you probably don’t want to put it all in your credit card.
Create a holiday budget and like many items to sink fund ideas, divide the amount you spend on travel by months. This allows you to really connect and relax as you can do family vacations or girls’ trips without worrying about money.
5. Childcare
Unfortunately, according to Care.com, the average family spends around 27% of their household income on childcare. (And 59% of parents expected to pay more than $18,000 per child in 2023!)
If you are a parent, the cost of childcare is a factor. This is one of the categories that may be considered. It can also include other expenses for raising your child, such as preschool fees (“How much does it cost before school?”), sports and activity registration, clothing, dentistry and eye care, summer camps, and more.
Some childcare-related costs are unexpected, like when your child suddenly grows up, but setting up a sinking fund allows you to prepare in advance for many.
6. Brace
Not all children need braces, but many do. The braces are very expensive and cost thousands of dollars.
If you have multiple children, you can spend more. Therefore, it is worth adding this expense as a financial goal.
If you have children or are planning to start a family, start salvation early.
7. Utilities
While this may not be the most exciting item in the sinking fund category, the utility is usually a required cost that fluctuates throughout the year.
For example, if you live in an area with severe winters, your electricity bills may be higher in winter than in summer. However, you can consider ways to reduce your electricity bill payments.
You can plan these moments ahead of time by setting up a sinking fund within your budget. Understand the average you paid last year and divide it up over 12 months. That way, when your bills become more expensive, you already have money in your account.
(Some utility companies will arrange this for you. They estimate your total invoice and split the estimated total equally between monthly invoices for the year. However, if it is not provided by your utility provider, you can do this yourself within the Sinking Fund.)
8. Self-care
Although self-care on Sundays doesn’t have to be expensive, it may make sense to set up a self-care sinking fund if you want to get a specific hair or spa treatment.
Massage, nail care, laser hair removal, and more are all the costs that can be combined. So, by setting up a sinking fund, incorporate ways to treat yourself into your favorite budget.
If that’s not the cost you need, you can feel better so that you can save a little weekly or month for that particular purpose. After that, it is less likely to ignore these special treatments and activities for money.
9. Special occasion
Special occasions like major anniversaries and weddings may not happen every year, but when they do, they are often expensive.
For example, the retirement, a vermitzvah, a kinkanella, or the average wedding cost can be tens of thousands of dollars. Depending on your family and social expectations. Don’t feel like you have to blow your monthly budget to impress someone.
You can start saving on these events a few years ago and help spread the cost of these one-off expenses. (If you’re like me and there are a lot of nies and nephews from college, those graduations and potential weddings are future costs!)
10. Annual renewal cost
Some invoices are recurring expenses that occur annually, such as annual renewals.
For example, you probably have a subscription to software or other memberships. Even if you pay a lump sum every year, you can still reserve money every month to spread the burden on your budget.
Once payment is made, write it on the calendar. You can then prepare in advance for what is a repetitive cost.
11. clothing
Unless you’re taking on a new clothing challenge, you might want to create a sunken funding category for clothing. It includes general clothing, seasonal clothing such as coats and shoes, and clothing for special occasions such as weddings and work events.
You may not need to buy new clothes every month, but it will help you put your money aside each month and prepare whenever it’s time to replace worn clothes. That applies to children’s clothing too. The sinking fund for their clothes is just as good as they are over the items quickly.
12. gift
Birthday parties and anniversary presents can show you the loved ones you care about. But if you don’t pay attention, they can also earn bills and debts. Additionally, you can give gifts on other occasions, such as Valentine’s Day, Mother’s Day, Father’s Day, or other special occasions.
Thankfully, this category is usually easy to save. The amount required for a gift may be lower than other sunken funding categories.
However, this depends on the number of people in your life, so no matter what, a gift budget item will help. Sustainable Christmas and Experience Gifts for Kids are great options, but that doesn’t necessarily mean that they’re free!
13. Home maintenance
If you’re a homeowner, you’ll need to do some maintenance in the end. Home maintenance is one of the best categories as it works like an emergency fund but works for specific purposes in the home.
The Sinking Fund allows you to plan your inevitable home maintenance bills in advance. Unexpected bills for plumbing, windows, garage doors, and even sinking foundations (listen to that!) can put dents in your finances.
It is usually suggested that you save 1-4% of your home’s value every year for maintenance. If you’re lucky, you don’t need to use it every year. But the flip side is that for several years you may face the costs of multiple large homes at once.
It is a wise plan to create a sinking fund for repairs to the specific home you need. It is also something to consider when deciding, “Should I buy a house now?” Because it is another ongoing cost.
14. furniture
The Sinking Funds category also includes home decor such as furniture and new appliances. New sofas and beds are very expensive. Instead of wondering where your money will come from, plan ahead.
Putting it aside a little earlier each month is much less stressful and better for your credit score. This type of sinking fund is great for homeowners as retailers sell appliances and furniture at certain times.
Planning ahead as a homeowner will help you take advantage of sales and offers while respecting your budget.
15. charity
One of the ideas of the sinking fund that you may not consider is to give to others. Whether you give it to a church, another charity, or both, you may want to save cash for good reasons in your sinking fund account.
Even if you don’t currently provide it to charities, the charity’s sinking fund can secure the fund if it leads to encountering or wanting to help.
Some people save a certain amount each month with a “giving” or “charity” thinking fund. There are accounts that explain when sharing generosity during the year when GoFundMe or other Giving campaigns arise.
16. Tuition fees
Some thinking fund categories include education expenses such as tuition fees. Education is expensive, especially for private schools. Once the person arrives at the university, the annual cost of attending at four-year schools exceeds $26,000 for universities in the state.
Obviously, this is a very large expense to try and plan. Student loans are an option and scholarships and part-time jobs can be useful, but sinking funds that begin years ago can relieve many headaches.
If you are sending your child to private school or saving for college, a sinking fund like the 529 College Savings Plan might make sense rather than a traditional savings account. (“Is the 529 plan worth it?”)
17. Pet care
Your sinking fund list may include caring for your beloved pet. This is another example of a sinking fund, as our dog and cat companions may also require some attention at some point in their lives.
In addition to the obvious monthly food costs, annual veterinary visits, vaccinations and emergency veterinary care should also be planned. While some people have pet insurance, many prefer to incorporate costs into their monthly budgets by saving instead.
Setting up a sinking fund for your cat, dog, or other animal will help you take care of them without adding financial stress. After that, if your pet gets sick or gets injured, it’s much easier to manage the additional costs.
18. Emergency Fund
If you don’t have an emergency fund yet, you definitely need to set it up.
In fact, you should start funding this category before any of the others.
Emergency funds are the type of category of sinking funds that can help you pay unexpected expenses you didn’t plan for.
In general, it is recommended to save about 3-6 months of living expenses. However, you can save more or less depending on your personal situation. Some people, like freelancers, may prefer to have a 12-month emergency fund in the case of volatility in the field of work.
Only withdraw from the emergency fund if there is a financial emergency and costs. If your car needs new tires or brakes, it’s an emergency. If you find yourself losing your job, use your emergency funds to pay your required bills while you search for a new one.
19. Pregnancy or adoption
Raising your family can be extremely expensive, including pregnancy, upbringing, adoption. Even in “ideal” situations, pregnancy costs a lot of additional costs.
If you are in the stages of your life where you are thinking about becoming a parent, then starting saving for that particular purpose is not a bad idea. A sinking fund for having children can reduce the financial burden.
Consider not only the medical costs that arise during pregnancy, but also the costs of missing work for childbirth. It can be difficult to miss out on months of work, as US employers don’t have to pay you for family or medical leave.
There may also be fertility complications that are not always covered by health insurance. If you decide to pursue adoption, that can also be very expensive. Individual adoptions range from $30,000 to $60,000.
20. Technology upgrades
This can be included as a “life upgrade” and in the more general sinking fund list. Still, technology and electronics are so essential to modern life that it can be put into a different savings category. Whenever you need to replace your smartphone, laptop, e-reader, or other technological device, you can do so using the Sinking Fund.
Keep this in mind, especially if you rely on a specific electronic device for your work. If you’re working from home or remotely, work almost certainly requires reliable computers and related devices, so be prepared to replace them regularly.
twenty one. Fun and entertainment
This is one of the more fun ideas. It’s a literal “fun” fund. In the entertainment realm, you can only store what you know you’ll enjoy in your account. You may not know exactly what events will be coming, but saving hundreds of dollars will help you get ready when something exciting becomes available.
Will your youngster’s favorite band go on a once-in-a-lifetime reunion tour? You can purchase tickets using Thinking Funds. This will allow you to enjoy this opportunity rather than handing over it.
Expert Tip: Use Sinking Funds to Check Your Savings Progress
Sinking funds are a great way to plan ahead for costs that you know are coming in the future. By separating your savings into individual accounts, you can accurately grasp your progress towards each savings goal.
Budgeting is generally great for planning and tracking your expenses, but sinking funds can provide you with specific savings guidance. Depending on what makes sense in your current stage of life, you can earn as much sinking money as you want.
Understand each saving goal and contribute regularly to that saving goal. Looking at the increase in weekly or months in another savings account, you can predict the achievement of reaching the required amount.
What is the best way to organize sinking funds?
It is a good idea to organize and store your money for all sinking fund ideas in a high-yield savings account or interest-backed account. That way your money is easily accessible and will gain interest when you have it in your account.
Pay attention to the balance of each sinking fund. You can set up automated tellerships from your paycheck and then track your savings growth each month. Banks sometimes offer an easy way to organize sinking funds within a single savings account, so check if it’s an option.
How much should I incorporate into the sinking fund?
The best way to determine how much money you want to enter into the Sinking Fund is to determine the total amount you want to see in your account. Depending on the type of category of the sinking fund, it could be hundreds or even thousands of dollars.
If you have months to reach your savings goal, you can split the total by month to know how much you can save each month. This tactic works in many categories, from holidays to events to holidays.
For others, whether it’s home maintenance or a “next new car” thinking fund, they just have to decide on the amount each month until they actually need the money.
What is the cost category for the sinking fund?
Essentially, the cost category for a subsidence fund is the costs you can plan. They are not usually an emergency, but that doesn’t mean they’re not important. And they can help you “save money better”!
Perfect for recurring annual costs, one occasion such as a wedding or holiday, or replacing items that wear out (cars, furniture).
What sinking funds should you have at once?
As it is a personal financial decision, the sinking funds that should be recommended are not fixed. You can determine the number of sinking funds that will help you.
The key to the number of “correct” sinking funds is what can be handled. If you had 12 sinking funds, it could be so much to track down. For some people, 3-5 sinking funds may be the sweet spot.
Another option is to create one big sinking fund for everything if there is too much on the list. It’s not that useful in terms of visualizing progress towards saving goals.
However, rather than stressing about sorting out 15 different thinking fund ideas at once, it might be better to soak one sinking fund.
Articles related to saving money for certain things
If you want to learn more about the various savings categories and find out more, check out the following article!
The Sinking Fund category will help you prepare for the future!
Having several sinking fund categories allows you to manage your finances and ensure you remain in debt free.
You can save money sinking into a high-yield savings account, checking account, or whatever you like. The main thing is to do pre-calculate how much it costs and how much it will be stored accordingly.
Depending on your needs and lifestyle, you can set up a sinking fund for almost any major cost you can reasonably predict. Pet care, vacation, university funding, self-care and gift-giving are just items that could fall on the sinking fund list.
To take this a step further, check out more about dealing with money in our article on budget best practices and money thinking.