Brushes & Budgets

Have you ever had a major expense that you knew was coming, pop up and thought…”sh*t…I don’t have the money for this”? Just when your boat is about to sink, queue sinking funds.

Sinking funds is a way to prepare for an upcoming expense that you know is going to happen at a specific time or any point. Think…car repairs.

According to federalreserve.gov, 32% of adults do not have the cash to cover a $400 unexpected expense. To make things even more bleak, 64% of adults are living paycheck to paycheck according to the data collected by CNBC.

https://www.federalreserve.gov/publications/2022-economic-well-being-of-us-households-in-2021-dealing-with-unexpected-expenses.htm#:~:text=Those%20who%20would%20not%20have,to%20handle%20small%2C%20unexpected%20expenses.

https://www.cnbc.com/2023/01/31/share-of-americans-living-paycheck-to-paycheck-jumped-in-2022.html

I was part of this 32/64% most of my adult life. The one thing that saved me before I began budgeting is, I managed to maintain some of the proceeds from selling my first home. Yet, I was still broke and struggling with money mentally. Not everyone makes as bad of a decision as I did that manages to payoff. Budgeting a small amount for savings and sinking funds can not only get you out of this rut, but help you to stop this very vicious cycle. Keep in mind, everything you save, needs a specific savings goal limit and name. A name is important for your savings goals because just saying “Savings” isn’t enough to stay motivated. I mean…what are you saving for? Car Repairs, Vacation, Christmas are all names that can be used to begin setting savings goal and prepare for the things in life that happen. Some expected, some unexpected.

For me, for now, I have $89 that goes towards, my annual car insurance ($43), my home warranty ($22), Amazon Prime ($6), renewal for my business ($10), and my car registration ($8). Everything except my car registration auto-pays on August 4th every year. Once I get out of debt, I’ll make changes and I will save a higher amount that won’t break my budget. I just started my sinking fund last year when I realized my insurance premium went up for my car. I now have a name for it instead of randomly throwing money at my Money Market.

Saving up smaller amounts over time will keep you from swiping your credit card and racking up further debt. Or balance transferring your money like I did.

When you have more wiggle room in your budget, consider sinking funds to stay afloat!

Photo Credits: https://www.businessinsider.com/musk-calls-ev-business-sinking-ship-2014-7