Sinking Funds; Exploration Of A Debt Free Life


As I wrap up this series on Exploring A Debt Free Life, I wanted to chat about sinking funds.

What is a Sinking Fund?

It is a set amount of money for a bill, or life event that you know is coming.  You then put aside a little bit of that every paycheck, so when it comes time to pay for it, you already have the money set aside, ready and waiting. No stressing.

Having the money set aside for large bills or life events takes all the stress and anxiety out of those things for me.

Our propane company offers a pre-buy program.  They allow you to give them a certain amount lump sum and in exchange, you get your propane at more than $1 off the market price.  So, if Propane is selling right now at $2.50 a gallon, we would be locked in at $1.50.  Even if the price goes up to $5 a gallon, we aren’t going to pay more than $1.50 until our reserve account runs out.  I pay them about $1200, and this lasts all year.  But, this means the rest of the year, I am sticking $100 a month into a sinking fund account for JUST propane.

Here are three Sinking Funds I have:

Christmas:  This is an interesting one.  It happens every year at the same time, and so many go into debt or get behind on other bills because of it.  I love giving so I put aside a nice amount each month for Christmas.  This fund also includes all Christmas foods, cards, and decorations.

Taxes:  Because our house is paid for, we need to make sure money is put aside for property and school taxes.

Camp:  We have a house that is in a private association that has taxes and dues attached to it.  There is a fund for that.

Having a plan and creating some sinking funds will save you from pulling out your hair.  It will get rid of that nasty stomach butterfly feeling.  You know the one that goes along with the rapid heartbeat and cold sweat when something big has come up, and you were not prepared.

Trust me; it has saved me!






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