sinking funds

[lavatea]

What are your sinking funds? I have some set up, but I think there are some things that I'm not budgeting for that I should be. I worked on the budget yesterday, and I just don't understand how we can be barely scraping by the way we are (actually, we're about $600 over the income I budgeted for, but both of our incomes are somewhat variable, so I'm hoping I budgeted the income too low). It feels like we are low income, but on paper we definitely aren't.

Our funds:
family vacation
presents and birthday party
anniversary trip
family pictures
car repair/down payment for new car

I know we should be putting some away for medical expenses like co-pays and prescriptions. And I should probably have a fund for alcohol the way DH drinks. And then there are things like hair cuts that it would be nice to have a fund for. I'm really bad about only having my hair cut 2x per year. And it really needs it more often - same with the kids' hair. There really probably needs to be a clothing fund, too. Sigh. I have no clue where that money would come from.

[SunRise]

These are my main annual sinking fund categories.

Car insurance

Vet

Dentist

Travel/Vacation

Extra curricular/summer camps (kids)

The first three are known expenses. I have a pretty good estimate for what they will be. I finally switched the car insurance to a non-fee bi annual payment instead of paying for10mths w/ a 5 dollar fee each time. I like to travel, I usually do and now I have a pre-planned savings for it.

I do not have a sinking fund for clothes, hair cuts, etc. as I find these categories flexible. There is never an emergency for when he needs a new pair of shoes or shirt...he can get by with what he has for a while. I tentatively plan to buy new shoes in the spring, after boot season, for instance. I don't bother buying shoes in winter as he wont get much wear out of them (although I always ask him if his current shoes are still ok). I buy clothes/shoes with my "extra" monthly cash, but if I am short, it can wait. Hair cuts, a rare thing. When I have the urge and feel like getting pampered. Other expenses (gifts, day trips) are also covered with my monthly allowance.

Lets see, I suppose a new car fund would be worth while, but right now I am renovating my kitchen...when that is done, maybe I will transfer that cash flow to car fund.

I have an ongoing "emergency" fund. It is not for short term emergencies, it is  a long term one (job loss, etc.) so it is not a sinking fund, its a growing fund.

Home maintenance or new roof fund, what ever happens first.

Edited by SunRise - 2/1/12 at 7:31am

[TiredX2]

We have our Emergency Fund and then sinking funds for:

Major Household (this would include furniture or repairs.  Basically anything for the house that is over $100).

Entertainment (vacations, travel, etc.. does not include eating out).

We also have a Medical Emergency Fund.

We used to have a car savings fund, but stopped actively doing that when we got our second vehicle.  We will need to build that up again something in the (hopefully not too near) future.

[lilacvioletiris]

We have the following sinking funds created as separate savings accounts on ingdirect.com

• emergency fund (non-designated)
• Green Card Removal of Conditions (getting my DH his 10 year green card this summer!)
• midwife (health insurance doesn't cover her and her fee is about what I would have to pay in copays for a doctor anyway and we aren't pregnant yet but want to have the money when I am)
• bathroom (we need to put an exhaust fan and update the shower enclosure)
• Christmas (both money for gifts and extra money for gas to travel to see relatives)
• car (we need new tires and some rims but also registration)
• vacation (to see parents in the summer, mostly for gas)
• Toledo Trade show (DH really loves RC airplanes and want to go see other people's great creations)
• birthdays
• professional dues

I like having my money named, so I don't just spend what is in the savings account.

[laohaire]

Here are mine. I am aware I am anal about this. Don't care. At least it will give other people ideas.

Taxes - I try not to overpay Uncle Sam that much. Would rather keep the money. But I also put some aside so if we do owe, we already have it. Pluses: tax returns are mostly instant (just have to wait for some of it), make a puny amount of interest (better than 0) on it all year.

Heating Fuel - We aren't on a monthly plan. This includes oil and wood, as we have both heating systems.

Auto Insurance - Now I pay in full, then as soon as I pay I contribute to this sinking fund for the next year's premium.

Medical - To cover deductibles.

Dental - We don't have dental insurance, so this has to cover everything.

Life Insurance - Same deal as auto insurance.

Auto - Covers maintenance, both planned (oil changes, rotating tires and whatnot) and unplanned (repairs).

Pharmacy - DH gets a prescription every 3 months online and I put aside some each month for it.

Airfare - Annual airfare to visit my parents.

Water/Sewer - Quarterly city bill.

Trash - Annual sticker for the dump, $50

Car Excise Tax, Registration - Blah blah

Gifts - Covers our Christmas and birthday gift obligations

Veterinarian - Blah blah

X's Wedding - Special one-time fund for a friend getting married later this year, to cover my airfare, hotel, transportation and wedding gift.

Home - Maintenance

New Car - We're not shopping for a new car in the foreseeable future, but sometime in the next, oh, 20 years we'll probably need a new one. This fund is unfortunately underfunded, but hey, it's something.

Bulk - A little set aside to take advantage of bulk deals should something great pop up.

Homeschooling - Books and all.

CSA - I try to set some aside every month, even the ones I don't have to make a payment.

[Narawen]

Here are mine:

Vacation

Medical: covers deductibles, co-pays, and any OTC/first aid products

Clothing: I rarely shop for clothes, but I like a small account specifically for them so I don't blow my budget one month

Car Maintenance: for regular maintenance like oil changes, or more major repairs, though hopefully those are a long way off

Gifts

Cosmetics/salon

I have a set amount I slow the monthly contributions off at, then a higher amount where I'd stop contributing to the fund until I used some of it. I don't want to contribute indefinitely, when I know I'll never buy $500 of clothing at one time, and my money can be redirected elsewhere. I'd like to start other funds like a moving expense fund, house down payment, car replacement fund, though I consider these to be more "one time" expenses than expenses that occur at least on an annual basis, bur irregularly. 

[Carson]

Ours are:

IRA - I like to put in a monthly amt in our savings then actually invest it tax time the next year.  It's just because I'm a little nervous about coughing up that money.

Property Taxes/Home Insurance - we're not escrowed

Pet vet fund

Water bill we pay every 6 mos

Car maintenance

Classes - this is for fitness/enrichment activities, memberships, etc...

Travel - I actually saved up for a trip before we took it, shocker for me!

Major home improvements - our home is under constant renovation, so we maintain a pretty steady stream of money going in and out of this account.

For medical, I use an FSA, which I don't like handing over that money, but I at least get our deductibles taken out of there.  The years are just too unpredictable to commit to more.  Last year we cash-flowed through an appendectomy and ER visit for me.  If something major happens this year, we'll have to take it out of emergency savings...

I re-allocate our funds kind of like Narawan does.  I'll start using the vet money for pet food money if everyone is healthy halfway through the year.  Or we'll swap travel/home improvement if we mutually agree on something. 

[cristina47454]

I'm curious to know how much your sinking fund amounts to every month. Last year I got a windfall and put most of it our sinking funds upfront - it totaled about $7500. It was great knowing the money was there when those big bills came up and Christmas was around the corner.  The reality is, most of our bill come up around September onward (kids activities, life ins., oil heating, Christmas gifts, etc)  This year I really want to pay down as much cc debt as possible, so it seems silly to have that money sitting in an account while I'm racking up interest.  If I pay my card off significantly, I should be able to cash-flow most of these expenses.  Do you think this is misguided?

[laohaire]

Originally Posted by cristina47454 

I'm curious to know how much your sinking fund amounts to every month. Last year I got a windfall and put most of it our sinking funds upfront - it totaled about $7500. It was great knowing the money was there when those big bills came up and Christmas was around the corner.  The reality is, most of our bill come up around September onward (kids activities, life ins., oil heating, Christmas gifts, etc)  This year I really want to pay down as much cc debt as possible, so it seems silly to have that money sitting in an account while I'm racking up interest.  If I pay my card off significantly, I should be able to cash-flow most of these expenses.  Do you think this is misguided?

I don't think this is misguided.

How healthy is your emergency fund? This is a little different from your sinking funds, though there are certainly overlaps. I don't have a sinking fund for "job loss" for example. Though I do think that the work of the emergency fund is *somewhat* eased by the sinking funds, both by covering at least some emergencies (like car repair or medical deductibles) and by easing your expenses in case of income loss. But I would certainly consider the total amount of cash on hand and ask if there is enough to pay down the cc while still making you feel secure for the time it would take you to repay the savings.

The total amount is going to vary so much between us depending on lifestyle and so on that it doesn't really answer your own question. (For example, my annual gift budget is $200... for everyone... way less than most people.)

I guess I'd be thinking something like this:

- I need X amount of cash (emergency and sinking funds combined) to get me through Y number of months if I lose my job or income ceases for some other reason.

- I have Z amount above that amount, therefore that is the amount I would put into debt payoff.

OR

- If I pay off my debt with X amount of money it would take me Y months to get my sinking fund back to par, am I comfortable with that timeframe or not?

OR

- I will do the Dave Ramsey plan and get gazelle-intense. I am committed. Therefore I begin Baby Step 2, putting all but $1000 baby emergency fund, into debt repayment. As soon as I am done with that, I will intensely continue into Baby Step 3, a fully funded emergency fund, and so on.

Anyway, I would be leaning toward debt repayment if I were you too, but those are just the things I'd consider.

[lavatea]

I have an emergency fund and I also use my sinking funds as back up (in fact, mine have just about been wiped out by my maternity leave ).

Here's how I'm currently funding mine:

family vacation - $166.67/mo.
presents and birthday party - $125/mo.
anniversary trip - $83.33/mo.
family pictures - $41.67/mo.
car repair/down payment for new car - $140/mo.

I change this pretty frequently. I swear one of my hobbies is playing with my budget spreadsheet, lol. And I'll probably be adding at least a medical/dental sinking fund this year. There are some other great ideas throughout this thread that I may incorporate. I also cap/redirect funds, in theory, but I've never built mine up enough to get to that point.

I was keeping $1,000 in our emergency fund, but I'm starting a new job where I get paid better per hour but the shifts aren't necessarily guaranteed, so I plan on building it up to $3,000 before I move on to serious debt repayment. I've also decided that we're going to put 5% away for retirement. I know that that may seem silly when you compare return rates on investments vs. debt interest, but I'm not sure you can compare them that way. I've seen way too many "if you started saving x amount in your 20s vs. y (higher than x) amount in your 30s" scenarios. I really feel like even if it ends up only being for my peace of mind we need to start putting something away.

[SunRise]

Originally Posted by cristina47454 

I'm curious to know how much your sinking fund amounts to every month. Last year I got a windfall and put most of it our sinking funds upfront - it totaled about $7500. It was great knowing the money was there when those big bills came up and Christmas was around the corner.  The reality is, most of our bill come up around September onward (kids activities, life ins., oil heating, Christmas gifts, etc)  This year I really want to pay down as much cc debt as possible, so it seems silly to have that money sitting in an account while I'm racking up interest.  If I pay my card off significantly, I should be able to cash-flow most of these expenses.  Do you think this is misguided?

I don't think you are misguided. If you have the extra money each month to cover such expenses, then why not just pay for it when it happens... I did manage my money this way and it was ok, and then I felt inclined to tweak my money management...

I can mostly cash-flow my expenses but it seemed that each month there was an extra 200 dollar expense (vet (had 4 animals and something was regularly happening), or dentist (paying for cleanings (planned) and then had to make another appt. for a filling (unplanned); car insurance (more predictable but still).  I became debt free and thought I would take my financial goal a step further by socking away money to cover these expenses. I wanted to have money designated for this, so I could then make use of the extra monthly money for other things (fun stuff).  (this is all recent stuff for me, about 6months in the works - its a work in progress, learn as i go)

My monthly sinking fund is small (3%) and this covers vet,car insurance,dentist.

Travel fund is bigger. (6%)

Extracurricular. (2%) (this is for camps, leagues - it doesn't include a ski day, for instance)

Savings (IRA,Longterm) is 20%

Home renovation (5%)

Home maintenance (3.25%)

A few months ago I broke down my expenses into percentages to see how much money was going towards a certain category, aiming to live "50-20-30" (50 for expenses, 20 for saving, 30 for fun / quality)  Although, I am more 50-25-25 - depends how one categorizes. This allows me to have some money designated for predictable expenses and some money [un]designated for unpredictable things, spur of the moment, cash-flow, disposable...

Edited by SunRise - 2/2/12 at 9:39am

[TiredX2]

Originally Posted by cristina47454 

I'm curious to know how much your sinking fund amounts to every month. Last year I got a windfall and put most of it our sinking funds upfront - it totaled about $7500. It was great knowing the money was there when those big bills came up and Christmas was around the corner.  The reality is, most of our bill come up around September onward (kids activities, life ins., oil heating, Christmas gifts, etc)  This year I really want to pay down as much cc debt as possible, so it seems silly to have that money sitting in an account while I'm racking up interest.  If I pay my card off significantly, I should be able to cash-flow most of these expenses.  Do you think this is misguided?

I don't think it's misguided at all.  If I understand correctly, if you paid off your cc debt, you wouldn't need sinking funds for those expenses?  In your situation, this is what I would do:

1) Pay off the credit card debt.

2) Pay those bills as they hit.

3) Starting next year, start an actual sinking fund where you put in enough each month (Jan-Sept or Jan-Nov or Jan-Dec or whatever each bill is) so that you have the correct amount when that bill comes due.

4) Continue on with #3 indefinately, so you always have the amount there for the bills AND you can be using your income each month optimally.

This, of course, only applies if you have enough to pay off your CC fairly quickly.  I would definately be pouring money there, though, to get to where you can just live on your income and not have to be paying debt off of it OR be going futher into debt.  You should like you're doing great!

[lilacvioletiris]

The amount I put in sinking fund varies by the amount of overtime DH gets.  No overtime, no extra money in the bank.  Overtime gets distributed throughout my sinking funds and usually the majority goes to the sinking fund that would be used first.