Understanding Sinking Funds For Better Budgeting

It's challenging to cover a significant expense in a short duration. Some people go into debt over it. A well-established sinking fund helps shield life's unexpected events, protects your financial goals, and promotes better budgeting.

A sinking fund is a cash reserve in your account that holds calculated funds for future expenses.

What Is the Purpose of a Sinking Fund?

Cover Planned Expenses

The planned expense could be something as small as a gift purchase or Christmas costs or as big as a family vacation and furniture purchase.

Cover Unplanned But Anticipated Expenses

Medical bills, home, auto repair, and maintenance are some anticipated but unplanned expenses. While you can't determine an exact budget for these things, planning for them is necessary.

We set up emergency funds hoping we never have to use them. A rainy day fund takes care of life's unexpected events. You'd never expect to lose your job, yet, it is not uncommon.

Protect Emergency Fund

Promote a Good Budgeting Habit

Setting up a sinking fund is a sound financial decision. It is a way of forward-thinking about financial responsibilities.

A well-established sinking fund covers life's unanticipated circumstances. You are not required to come up with a considerable amount of money in a short time. It protects you from going into debt.

Avoid Debts

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