Author Topic: Does anyone do sinking funds?  (Read 3403 times)

mrsggrowsveg

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Does anyone do sinking funds?
« on: March 12, 2015, 07:28:39 AM »
I haven't noticed a lot of sinking funds or rainy day funds on here.  I have started using YNAB and we are now accounting for our irregular expenses such as propane and car repairs on a monthly basis.  We also started doing savings goals for travel and a vehicle.  Do you all put away money for these things each month or just deal with them as they come up?  We used to just wait until things came up, but if we significantly increase our retirement contributions we won't have that extra money each month.  How do you handle these?

terran

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Re: Does anyone do sinking funds?
« Reply #1 on: March 12, 2015, 07:46:35 AM »
Yes, we definitely do this. Unless you have a high enough income to just cover any large irregular expense out of one months income by saving a little less that month, I think it makes a lot of sense to do this kind of income smoothing. It lets you know what "saving" is really just accounting for upcoming expenses/spending and what can truly be saved/invested.

Spork

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Re: Does anyone do sinking funds?
« Reply #2 on: March 12, 2015, 08:02:02 AM »
Yep, we do this and have for a long time.  We're using gnucash and some accounts have sub-accounts for this sort of thing. 

Car fund is a good example.  It not only pays for repairs, but also pays for a replacement vehicle. 

We don't do a lot of individual stocks... but we have a few and handle them similarly.  We put aside a little over time (and our dividends pay into that same fund).  When there is enough for a reasonable-sized purchase, we buy a few shares.

MooseOutFront

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Re: Does anyone do sinking funds?
« Reply #3 on: March 12, 2015, 08:09:48 AM »
Yes.  I have a single singing fund checking account that gets a set monthly transfer in.  It includes the annual budget for the following:

Property Tax
Home Insurance
Auto Insurance
Life Insurance
Car Repairs
Home Repairs
Dental and some Medical
Charity
Vacation
Christmas

I track them on a spreadsheet throughout the year.  Works well, but I do feel like I have a tendency to spend more in some of the categories since the money is already set aside.  Plus adjusting the budgets up $100 here or there doesn't make much impact on what the monthly transfer in is so I have to watch that.

NotJen

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Re: Does anyone do sinking funds?
« Reply #4 on: March 12, 2015, 08:10:07 AM »
I just deal with them as they come up, no need to have a sinking fund. My big month is May, when I have $1725 worth of irregular expenses due (car insurance, home insurance, and Sirius subscription).  Fortunately, this usually happens near enough to my 3-paycheck month that I can still add to my savings. Otherwise, I would skip that month (aside from auto 401k contrib) and make the savings up over the rest of the year.

BlueHouse

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Re: Does anyone do sinking funds?
« Reply #5 on: March 12, 2015, 08:29:41 AM »
Sort of.  I like the idea of paying off all debt (an uncomfortably large mortgage), but also realize that may not be the best move financially.  Even if it were the best financial decision, it does me no good in terms of risk reduction to pre-pay unless I have enough to pay it all off.  My outlook is that I have a job that is at high risk of being cancelled, and my monthly mortgage payments are high.  If I pre-pay and don't save that money for when I don't have income, then I'm at risk of losing my house AND my savings.  So I stash my cash in an investment account and watch it grow.  When it gets large enough to pay off the balance of my mortgage, I may, repeat may, use it to pay off the mortgage.  By the time that happens though, 2 things are likely to be in effect  1.  I'll have seen the effect of compound interest and will be able to compare the benefits of both methods so that I'll decide to keep it in investments and not pay off the remaining balance; or 2.  I'll be so rich by then I won't feel the same pressure to pay off the debt. 
So I think of my taxable investment account as my sinking fund for paying off my mortgage. 

caseyzee

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Re: Does anyone do sinking funds?
« Reply #6 on: March 12, 2015, 08:40:45 AM »
I have a separate account for future car replacement and a separate account for a large-ish vacation.  The vacation fund is new, previously we've just done road trips to the beach or to visit Papa and Grandma.  But I wanted to save specifically for a larger trip.  I also set money aside to pay for summer childcare, which runs about $3200.

Other irregular expenses are small enough that I handle them out of my income.  My car insurance is only $500 a year, car taxes, etc.