Yearly expenses --- sinking funds

[Denvergirlie]

What do you sink funds for?

I am not to a point of doing this yet, but want to start in 2010, so am starting to think of what all I should sink for.

car maintance
car insurance (although I pay monthly right now, but would consider to paying in advance if I can get a discount for doing so)
gifts
travel
clothing
co-pay's -- But only normally go only once a year, I mean do I really sink for a $20 co-pay?
subscriptions
vacation (flight "home" once every 12-18 months and few days of camping)

We are renters, so don't worry much about maintance

We do do "projects" so buy $500 of stuff at hardware store a year, new tool, whatever.
We garden.... do I sink for my seeds I buy in spring?

We also buy vitamins and supplements a few times over the course of every year, but don't buy them monthly...

Wondering how far to take it and how much I just adjust the budget on a monthly basis.

Do you keep yours in a separte checking account?

Also, total point of curiosity, but what percentage of your net income would you say you sink for?

And finally, do you find it worth the trouble of doing so?
** I am the "nerd", so tracking on a spreadsheet sounds like a fun project that I would enjoy, but only if it will really benefit me to do so in the long run.

Any thoughts or feedback would be great, thanks

[samandhenrysmom]

My understanding is that you only do sinking funds for things you cannot cash flow.
Mine are: property tax, home maintenance, Christmas, car replacement

[SeekingJoy]

We are fairly laid back about it. We save enough money on a monthly basis to cover those large annual odd-ball expenses that can't be absorbed by our regular budget.

car maintance - only big repairs, not oil changes, tire rotation, etc.
car insurance - no, we pay ours monthly
gifts - only for X-mas. We make ourselves absorb birthdays, housewarming, etc gifts into our regular budget
travel - no, but I have also only flown once in the last three years
clothing - no
co-pay's - no, although if something really huge came up it could of course be covered by our EF
subscriptions - not magazine ones
vacation - yes

We also plan for life insurance, property taxes, CSA subscription, home repairs, and a handfull of other things. All of these are $200 or more.

We approach our budget like a game. After our fixed expenses, sinking funds and savings goals, we have $X left a month. Life -- birthdays, entertainment, things for the house, car maintenance, etc -- has to fit within that X. For us, it works as a challenge to get more creative.

[sunnysandiegan]

Originally Posted by Denvergirlie

What do you sink funds for?

car maintenance - no
car insurance - no
gifts - no
travel - same as vacation for us, yes
clothing - no
co-pay's - no
subscriptions - none, so no
vacation - same as travel for us, yes

Do I sink for my seeds I buy in spring?

That would depend on the dollar amount spent for me and if I could spread out the costs over a couple/few months to fit within my budget.

We also buy vitamins and supplements a few times over the course of every year, but don't buy them monthly...
No, we absorb them into our "health:medicine" category, if they are qualified expenses through our HSA, or "health:non-qualified" category, if they are not qualified through our HSA, or "eating:food" category, if they are actual food that we may use as supplements.

Wondering how far to take it and how much I just adjust the budget on a monthly basis.
I don't adjust our monthly budget. I simply make sure that if I need to spend over the set budget amount in one category, then I spend less in another category in that same month.

Do you keep yours in a separte checking account?
I keep our vacation savings in a separate account. When we didn't, we either didn't take vacations or we overspent without realizing it.
Home repair is partially kept in a separate account. I budget a small amount for regular home maintenance items, like a toilet handle or electrical outlet, on a monthly basis. (I think it is $35/month.) If we have a surprise larger home repair come up, then we either use our vacation savings or our living expenses "emergency" savings. It depends on the amount. We basically treat our vacation savings account as planned home improvement savings every other year and planned vacation savings every other year. For larger planned home repair/improvement projects, we use whatever is in the "emergency" savings that is over our minimum low balance. When we have been building it, we set minimum thresholds at 3 months, 6 months, and now 9 months. We allowed ourselves to "skim off the top" for big projects as long as we didn't dip below our threshold at that time. We do this because we always contribute a large percentage of our net income to this account and it earns interest. It is habit to keep the amount fairly constant going into this account.
We also do this (like "home repair") with "furniture", if it is over "x" amount. Although, some years I know we need to buy certain pieces of furniture and will budget a monthly amount that keeps our cash flow maintainable. Sometimes we will use free financing in order to be able to pay it monthly and sometimes we pay cash. Depends on where we are in the cycle and what is available.

Also, total point of curiosity, but what percentage of your net income would you say you sink for?
I don't know, but can look it up later...

And finally, do you find it worth the trouble of doing so?
** I am the "nerd", so tracking on a spreadsheet sounds like a fun project that I would enjoy, but only if it will really benefit me to do so in the long run.
I am a "nerd", too, and enjoy tracking expenses to a certain degree. I prefer, however, to keep a cushion in our regular joint checking account to cover most of the items you mentioned above and track our categories to make sure our cash flow can support this process. I like having one joint checking account, one short-term joint savings account (vacation/home repair/furniture), one mid-term joint savings account (7-9 months living expenses right now), and IRAs. The upkeep is less than having separate accounts for every single little thing.

[Denvergirlie]

So I do cash flow everything right now. But at the same time, I like to know that I will put "x" amount of dollars into savings each and every month.... I don't like it when this savings number changes....(inner nerd issue).... thus the reason I was thinking about the sinking funds.

[sunnysandiegan]

Hmm... our savings amount doesn't change each month. It is set and automatically transfered to the short-term savings account and mid-term savings account.

[maryjane]

Originally Posted by samandhenrysmom

My understanding is that you only do sinking funds for things you cannot cash flow.

Ditto that. Our budget is really quite tight, so we sink for anything we can reasonably expect.

car maintenance - yes, but only $25/month, as that's all we can afford right now
car insurance - yes, as well as renter's insurance
gifts - yes, we have a "family gift fund" for birthdays and holidays (it's modest -- $30/month). In addition, we put $20/month into an envelope to cash flow birthday parties for the kids' friends, wedding gifts, etc.
travel - ideally, yes, but we often don't have money left over to fund this category
clothing - no, this is a monthly envelope
co-pay's - no, although I have an HSA, so in theory I "sink" 1/12th of my deductible every month. Our OOP medical expenses are funded with a monthly envelope.
subscriptions - don't have, but I wouldn't think that would be something to sink
vacation - like travel, if there is money left-over, we'd sink for it

Additionally, we sink for:

- accountant's fees
- computer replacement (both DH & I are self-employed)
- car replacement

I don't know how much you are spending on gardening, but if it was me, I'd probably either have a gardening envelope if the expense was ongoing or cash flow it for a particular month. I might also "steal" from my food envelope.

[crunchy_mama]

We haven't done really well with this and am hoping and planning that next year goes better. They have all kinds of Christmas club accounts I want to do that for sure. This year I tried to do it in regular savings but it didn't work very well. I also want to open a vacation acct as well. We will be finally starting a HSA as well. I am still thinking about how to tackle the auto expenses. For me mentally I want it in separate accounts. There is also auto insurance which is paid yearly- saves us $72 a year. House insurance and taxes go into an escrow account so I don't even have to think about that. Actually- I need to start on the car insurance next month as we just paid it and I want to divide the amt into 12 months.

[BetsyS]

Our budget is tight, so there isn't much difference for us between the regular monthly envelopes and sinking funds.

We have an envelope for car expenses. If it doesn't get spent that month (and most months it doesn't), it rolls over to the next month. We drive an older car, so this fund is a little larger than others might need ($80/month). When we have a repair, we pay it out of that envelope. If we don't have enough, it'll come out of our general fluid savings account (our short term emergency fund).

Our envelopes include: car expenses, pet expenses (vet bills and/or boarding--food comes from the food budget), car insurance (pay every 6 months; each month I put 1/6 of that cost in the envelope), car tags/tax, vacation, Christmas (which for us includes the travel to see family during the holiday season), books/magazines (which includes subscriptions), healthcare (which I use for vitamins, for copays, for anything like that), and clothing (we tend to spend in spurts through the year, but I put money in monthly). I was working during my first pregnancy, and we had a little extra money at that time. I put it in a "special baby purchases" fund. That baby is now 3, and it's down to $8. But, if I find a perfect $8 item, and our clothing/gift budget is already spent, hey, I've got $8.

So, for us, the sinking funds and envelopes mesh. I have no problem rolling over money, though, and eventually, something comes up, and it gets spent.

[Carson]

Here are ours:

• Annual IRA contribution (to nervous financially to have this automatically going somewhere)
• Property taxes home insurance
• Pet health
• City - water/sewer/trash (billed 6 mos)
• Car maintenance
• Travel
• Car replacement fund

Each month, I transfer the monthly amount from my regular account to this special 'escrow' savings account at the same bank. I can do it online so it's easy. I keep track of the balance in Excel and have a column for each month, rows for each line. I transfer money back to my regular account as needed. I really like having it in separate accounts.

I love that we have it. It keeps our monthly cash flow more stable. When we had a tighter budget and one income, I paid all these bills out of our regular accounts. It required some more monitoring on my part and I didn't like those huge negative months. This way, I know our important stuff is set aside and taken care of, and I'm not as concerned about our monthly ups and downs.

This accounts for about 30% of our net income. Yeah, it's definitely a lot, but travel and IRA aren't really 'need' expenses, and they make up the bulk of what we're transferring over.

[Sarah8Jane]

Originally Posted by Carson

Each month, I transfer the monthly amount from my regular account to this special 'escrow' savings account at the same bank. I can do it online so it's easy. I keep track of the balance in Excel and have a column for each month, rows for each line. I transfer money back to my regular account as needed. I really like having it in separate accounts.

I love that we have it. It keeps our monthly cash flow more stable. When we had a tighter budget and one income, I paid all these bills out of our regular accounts. It required some more monitoring on my part and I didn't like those huge negative months. This way, I know our important stuff is set aside and taken care of, and I'm not as concerned about our monthly ups and downs.

This!
Plus before I instituted sinking funds, all our extra money went to a black hole called savings - yep, I'm a saver - and once it was saved, I just couldn't spend it. Sinking funds 'allow' me to spend money (vacation, computer replacement, etc.). We are able to set and accomplish goals, and that's pretty nice.

Let's see, we sink:
Travel/vacation
Taxes
Car/renters insurance, car licensing, etc.
Holiday
Car repairs
Car replacement
Computer replacement (dh is in IT/IS)

~15% net income goes to sinking funds