We all have bills to pay. With bills, comes the responsibility to pay them off. Some bills, are debts that require premiums and interest payments that can drive up the cost and sometimes overwhelm you. When it comes to those sinking debts, you need to categorize them and pour extra funds into them. Here are sinking fund categories that should be in every budget.
What Are Sinking Funds
Not only can you sink money into debts, but you can sink money into your budget. In terms of debts, you can think of a sinking fund category as a debt the can require maintenance or other expenses beyond what is owed. Take for instance a car. Aside from a car note and insurance, you have to have regularly scheduled maintenance, plan for unexpected emergencies, get an emissions test, and registration each year. The sinking fund is a savings method to pay for these routine and unexpected expenses.
List of Sinking Fund Catagories
A sinking fund can help you stay on budget. Here are some sinking fund categories that should be in every budget. Among the top categories are car, medical, and home maintenance. Other categories include dental, vision, vacation funds, and gifts. For a list of other sinking funds and a proper description of each, be sure to click here.
How to Add them into Your Budget
After identifying your sinking fund categories, it is time to set up your budget. You can do this by looking over previous receipts and banking statements relevant to your categories from the past year. Once you have identified how much additional money has been spent out, divided that dollar amount over 12 months. Set your monthly budget to include this figure, to help build up your funds.
Sinking funds can help keep your budget on track. They do this by taking into account expected and unexpected bills and maintenance that occur yearly. Adding these expenses into your budget, and spreading them out into monthly savings helps you be ready for the unexpected and keeps your budget intact.