A sinking fund is a way to put money aside for planned expenses. This is different than an emergency fund which is for UNplanned expenses.
A sinking fund is putting money aside each time you get paid to fund upcoming expenses. For example, a sinking fund could be used for Christmas. Based on Christmas 2018, how much did you spend? Take that amount and divide it by the number of months till Christmas and that’s how much you need to save each month for a sinking fund which will pay for Christmas 2019. Sinking funds can be used for vacation, home upgrades, tax bills, back to school shopping or any other planned expense.
Sinking funds are a great way to get ahead of the spending curve and avoid that debt monster!
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