Do you know what sinking funds are? If you do, great! If you don’t I’m about to get you hooked. They are LIFE CHANGING. They will have a huge impact on your budgeting and they are super simple to get started.
As someone who’s been debt free for over 7 years now, I can say that sinking funds have been a major habit that has helped our family stay on track and be prepared for unexpected expenses.
What are sinking funds
A sinking fund is a fund that you set aside each month to go towards a specific expense, savings, or payment. Primarily it’s money to allocate towards a specific savings goal. So instead of a generic savings account, these are mini saving funds with a purpose or saving with intention. There is usually a predetermined amount that is added to the sinking fund each month. Businesses can have sinking funds, but that’s not what we’re here to talk about, we’re going to be focusing on sinking funds in a family budget.
6 Sinking Funds Every Family Should Totally Have
We all know Christmas comes every year, but many people will wait until October or November to begin thinking about how they’re going to pay for those Christmas gifts. But, what if, you started preparing for that as early as January. Each month, you put a little bit of money into that Christmas sinking fund and by the time December rolls around, you’ve got the money set aside and you no longer need to stress about how to pay for the Christmas shopping.
Some bills aren’t due every month, like auto insurance, yearly memberships, and homeowners insurance. Instead you might only need to pay them once a year. It’s easy to forget to set aside money to pay these bills. That’s why it’s perfect to set up a sinking fund for each of these. Simply divide the bill amount by 12 and add that amount to the fund each month. That way, when the bill comes up, you aren’t hit hard that month.
These also come up every year and we rarely think to add them into our monthly budget. Why not set up a sinking fund. That way, when a birthday does come up, you have money in the fund ready to be spent on the gift!
Holiday decorations and food
Oftentimes when we go to family parties or holiday celebrations, it’s like a potluck, we all bring something. If we’re hosting, we also have to spend on the decorations, too. The expense can sometimes be a big hit and I don’t always want it to come out of my grocery budget. Instead, I set up a sinking fund to cover those expenses when they come up.
Create a separate sinking fund to add some money into a vacation fund. That way, when you get to the amount you need, you can pay for your vacation upfront instead of charging and then being left with bills to pay once you return.
Home and car emergencies
And you can’t forget those unexpected emergencies. Things break down all the time. Kids get injured and sick all the time. Those bills can be a major hit to your budget if you’re not prepared. That’s why it’s great to have a sinking fund set aside specifically for emergencies.
Can I set it up digitally?
Yes! It is so easy to set up your sinking funds digitally. I use an app called YNAB (You Need a Budget). It’s personal budgeting software and it’s available for Windows, Mac, and iOS. You can set up as many or as few as you’d like and you can make them as specific as you’d like. You can start with one or two, like a vacation and Christmas, and then grow from there. Setting up your sinking funds on an app is super simple.
How to set it up with cash envelopes
If digital is not your thing, you can instead use cash envelopes. Take out some cash and put it into an envelope. You can do this two different ways. The first way works like this: if you have five different sinking funds, take five envelopes, label them, and add the specific amount to that envelope each month. If you don’t want to have multiple envelopes around, you can use one envelope and track how much is in the envelope for each fund on the front of the envelope. Keep it all itemized right on the front of the envelope for convenience. This might be a bit easier than having multiple envelopes.
For more tips on setting up your budget, check out our Free Family Monthly Action Plan. This Monthly Budgeting Action Plan, offers step-by-step instructions to guide you through the exact steps you need to take to set up your own family budgeting plan.
One thing I know for sure – and you’ll hear me say over and over again is this: It’s never too early to start talking to your kids about money! I try to find spontaneous moments in my daily life where I can share with my kids about money. But, I try to teach them about money in a more structured way, too.
One way my husband and I do this is by holding Family Money Meetings. These meetings are designed for us to discuss and explain to our kids the process of earning money, spending money, and saving money.
What is a Family Money Meeting and why should we have one?
We had our very first family money meeting when we first introduced our kids to our chore and money system. The meeting was to discuss the new process and to make sure everyone was on the same page. We also wanted to get them excited about it.
We encouraged them to propose their own ideas or input into the new process and you can do the same with your kids. The more involved they are, the more likely they are to stick to the plan. If their ideas make sense and you can accommodate it, add it.
We now incorporate these Family Money Meetings into our schedule every few months to check in on the process and make sure everything is still working for everyone. We will also call a meeting sooner if there is an issue that needs to be addressed or a system that needs to be changed.
Here are 5 things we discuss at our Family Money Meeting
The first thing we need to discuss with our kids in a Family Money Meeting are the rules! The kids need to know what is expected of them. This should be very clear, down to the days things will be done and to what standard they will be completed. The more clear you can be about expectations, the more likely your kids will be successful.
Next, you need to discuss consequences. Discuss ramifications for things not being done, i.e. lose money and screen time. Be clear to explain that in the real world, people get fired if they don’t do their jobs.
For this topic, you want to let them know exactly what day each week they will be paid. Also, discuss what will happen each payday (see below).
After you talk to your kids about their pay day, you want to make sure they have a clear plan for what they will do with that money once they are paid. We suggest setting your kids up with three money banks: one for savings, one for spending, and one for sharing. You want to explain the three types of money banks they will have and talk about how they are different.
Once they receive their pay, they will be expected to divide up their pay into the 3 money bins. I leave it up to them to decide where their money goes but the only thing I do reinforce is that something has to go into each bin. You could make it so that it’s a standard % like 40/40/20 or any variation–really it’s up to you. Keep in mind that you will want to pay them in denominations that would be easy for them to divide, whether it’s quarters or bills.
Next, you’ll want to talk to your kids about keeping track of how much money they have in each bank. Explain to them that each time they add in or take out money, they will need to track it. This is so they will always know how much money they really have. Then they can properly decide whether they can afford that new toy or not.
In the beginning and depending on their age, you will be more involved with helping them figure this out or be supervising. This is to make sure they understand what to do.
Staying motivated through these hard times can be difficult. Especially when you’re working towards financial goals. This year has been very hard, particularly financially, for many families. I think we can all agree, it’s been quite a year.
I know that staying motivated to reach your financial goals, whatever they are – buying a home, getting out of debt, saving for a dream trip – can sometimes be discouraging, especially if you can’t see the light at the end of the tunnel. It’s very easy to lose momentum and quit. But, that doesn’t have to be how it goes for you. That’s why I want to share some tips with you to keep at your financial goals even when the going gets tough.
Here are my top 5 tips when your are trying to stay motivated while working towards your BIG financial goals:
Name Your Goals
For me, making a goal specific is one of the main ways to keep motivated towards reaching that goal. If you have a vague or not very specific goal, it’s hard to stay motivated. It’s important to specify and name your goals. The more specific the better! Ask yourself what financial success looks like to you? And, when you feel like giving up on your debt free journey, dig deep and remember your why. Get clear on what it is all for
Once you’ve specified your goals, you need to speak them. Tell others about your goal, post about them on social media, put yourself out there and make others aware so they will hold you accountable. I’d also suggest writing out or typing out your goals and posting them in places where you’ll see them regularly – next to your laptop, inside your journal, on your refrigerator, etc. You could even incorporate them into a vision board if that’s more your style.
When my husband and I were first on our debt free journey years ago, it was tough and I wanted to quit. I just couldn’t see the light at the end of the tunnel. But I kept my why in the front of my mind and that helped.
Build Your Support System
Once you decide on your financial goal and you make sure your goal is very specific, get yourself some support. It’s best if those closest to you support your goal and also take part in reaching that goal. If you are in a relationship and/or have kids, try to make it a family goal that you can all work towards together. Maybe even make reaching the goal a game or fun competition with your family members. To stay focused and motivated when working towards your financial goals, make sure you have the support of your family and spouse so you can cheer each other on.
Celebrate Small Wins
If you set a huge financial goal, it can be hard to stay motivated along the way. It’s helpful to break your large goal into mini goals and celebrate along the way as you reach each mini milestone.
When my husband and I started paying down our over $100K in debt, we had to find smaller increments and goals to celebrate or it may have begun to feel overwhelming and like we were never going to get ourselves out of debt. Celebrating the little wins along the way can make things more fun and keep you motivated – even if your celebration is just yelling and dancing.
I love to think of it like this: How do you eat an elephant? One bite at a time. The same goes for paying down your debt!
This might be hard, but you may need to cut loose any friends (for the time being) who don’t support your goals. If your friends are not happy with your success or try to get you to give up on your goals, this can seriously impact your motivation to reach those goals. If you are clear on your financial goals and your friends are dragging you down, be honest with them about your goals and ask for their support. And, if they still try to tempt you to spend, maybe it’s time for some new friends who are more aligned with where you are at right now in your life and your financial journey.
If your friends can’t understand why you’d rather pay off debt than go on another trip, you might need new friends… just saying.
Find a Supportive Community
If you are looking for support and motivation as you work towards your financial goals, I invite you to join us for 31 Days of Money Motivation. Every day in December, across all of my social media accounts, I am sharing a Money Motivation Tip. We just started a few days ago and I am already floored by the support and encouragement that I am witnessing. If you need support as you charge towards your goals, come and join us!
To join in for the 31 Days of Money Motivation, go and give us a follow on Instagram, Facebook, or LinkedIn – whichever is your preferred platform.
Most people know they should have emergency supplies ready to go, but you may not be sure where to start, what to gather, and then what to do with it all. That’s why we’ve come up with a system for gathering, organizing/packing, and storing our emergency supply boxes.
Yes, I said boxes. We believe that to be completely prepared for any emergency, you need to have three specific emergency boxes assembled. You can find lists of suggested items to include in your emergency kit at FEMA or the Red Cross, but we take things a little bit further. In our home, we’ve divided our emergency supplies into three specific kits or boxes: a Stay-Home Box, a Leave-Home Box, and a Food Box.
Having emergency supply boxes prepped and ready to go is a must, especially for those of us who live in areas that are prone to natural disasters like wildfires, earthquakes, hurricanes, tornadoes, and flooding.
Here is a quick guide to how we assemble and organize our three emergency supply boxes/kits.
We recommend packing your boxes in three separate clear containers and clearly marking each: Home, Leave, or Food.
The Stay-Home Box
This is the box you will need if there is an emergency and you are stuck IN your home for an extended amount of time, possibly without electricity, heat, or other utilities. This box will consist of items that you might not typically have around your house for everyday use.
Here are 5 items we suggest you include in your Stay-Home box:
Flashlight with extra batteries
Hand Crank Radio
For a complete list of what you’ll want to have in your Stay-Home box, click here.
The Leave-Home Box
This box will have items you’ll need if you are forced to evacuate your home. If you evacuate, you will also want to take your Stay box and your Food box, plus water.
Here are 5 items we suggest you include in your Leave-Home box:
To view an extensive list of what to include in your leave box, click here.
The Food Box
This box will, obviously, be filled with food. You’ll want to store this box in your home, but also grab it in case of an evacuation.
Here are 5 food items we suggest you include in your Food box:
Canned Fruit and Vegetables
Canned soup, stews, and meat
MRE’s (Meals Ready to Eat)
These are just our recommendations, please feel free to add and remove items based on your taste and dietary restrictions. Remember to have a variety of items and not to include things that can easily spoil without refrigeration. To view our full list, click here.
Don’t Just Store them and Forget Them!
You may think that creating emergency supply boxes is simply gathering the water, food, and supplies, putting them in a box, storing them in a closet, and then (hopefully) never thinking about them again.
The truth is, your emergency plans and supplies need to be checked and reviewed quarterly. Some items will have expiration dates and others will completely stop working as time passes. I suggest making it a habit to go through the items in your boxes to check dates and replace/update items 4 times a year. One way to make this a habit is to do it on the first day of each season.
If you’d like a full list of what we put in each of our boxes plus a handy checklist for keeping track of what’s in your boxes and each item’s expiration date, check out our FREE Family Home Emergency Plan. You can download itright here. Inside, you’ll also find tips for preparing your home, printable lists and trackers for assembling emergency information, and other important planning tools.
When you think of the word BUDGETING, what’s the first thing that comes to your mind?
If you’re like most people, you probably say: “It’s a pain” or “It’s not for me”, and you run away from anyone who brings it up!
Here’s the thing though, what most people don’t understand is that a budget is just another way to say a spending plan, or a plan for how you want to spend your money. Now, I don’t know about you – but I LOVE spending money. I can’t think of much that’s more fun than planning how I’m going to spend it.
But, aside from that, there are some very distinct connections between budgeting and quality of life. Whether you’re a saver or a spender, getting on a spending plan will not only get you and your partner on the same page, but it will help you get what you want out of life.
Here are some insights into how setting up a budget or a spending plan will improve your life.
Budgeting Will Improve Your Marriage or Relationships
Typically, when you’re a saver, you’re more likely to want to get on a spending plan, so it’s not as much of an issue for you. Your bigger worries are about the spender in your relationship. So much frustration comes with having to worry about what they are spending on and how it affects the overall family finances.
For the spenders, you don’t think there’s a problem at all and you can’t understand why your partner or spouse is constantly nagging you.
No matter which side you’re on, without a spending plan or budget, you’re experiencing some level of stress and frustration. If you didn’t know already, money arguments are the leading cause of divorces. Establishing a budget or spending plan that you can both agree to and live with will create a much more calm, stable, and cohesive home.
Budgeting Will Improve Your Sanity
Money ties into almost every aspect of our lives, our social life, our home life, our kids, our education, etc. Money touches everything. That’s why, unless you get intentional about getting that part of your life organized, it’s going to cause a lot of tension in all areas of your life.
Once you have a spending plan or budget set in place, you will be able to release so much stress and tension.
Are you sold on setting up a budget or spending plan? Good! That was my goal. So, what can you do now? Let’s keep going!
Start talking to your partner or spouse and get on the same page.
If you and your partner have joint accounts, you can’t set up a budget and stick to it if you’re not on the same page. You have to both be on board with budgeting. The first step for this is beginning to have super open and honest conversations about what is actually happening with your finances.
You’ll need to identify exactly what is coming in and what is going out. Then, you need to make a commitment to each other and to your budget.
Get some assistance from an outside source to help you plan a family budget.
It’s okay to not be able to do it on your own. It’s actually really admirable if you recognize that you need help and you’re open to asking for that assistance.
Maybe you’ve tried different types of budgeting and quit because they just didn’t work for you. Or maybe you really want to get started but you are so intimidated by spreadsheets and budgeting apps. That is okay! There is a budgeting style that will work perfectly for you. You just might need help finding it and getting started.
Now that you know you’re ready to get a budget set up, it’s time to take action. Lucky for you, I can help with that! Let’s set a time for us to chat about how we can get you in control of your finances!