Sinking Fund Strategies For Beginner Story

Have you heard of sinking funds? My wife and I used sinking funds before we even knew what they were – and it was entirely by accident. 

This story explains sinking fund strategies for beginners and how you can use cash to take control of your finances.

With so many unknowns in life, you never know when a financial situation will occur that you’re completely unprepared for. For example, say you’re sitting at home, and your central air stops. Here in Arizona, that’s pretty much the worst thing that can happen in the summer.

Sinking Funds Keep You Afloat

What Is A Sinking Fund And What’s The Purpose?

Each sinking fund serves a unique purpose. They can be for something specific, like an event or future purchase, or they can be set up for any unexpected situations that might occur.

To avoid destroying your budget by unexpected financial disasters, it’s important to make a plan to protect yourself.

How Do Sinking Funds Work?

Basically, you set aside money every month for a certain goal. I will detail how to make and calculate them later in this article, but understand it’s important to set goals and boundaries.

For starters, make sure you know what you’re saving for. While an emergency savings is for general emergencies, sinking funds work much better if you know exactly the specific purpose of the fund.

Sinking Fund – What’s With The Name?

Now that you know what a sinking fund is, you might be wondering why it has that name. Some people might think it’s called this because they feel like they’re sinking when unexpected expenses come up, but that’s actually not the case.

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