The Importance of Sinking Funds! (Post 343)

What is a sinking fund you ask? The simplest of answers is this, its money you squirrel away for something you want to save up for.

Example: Christmas presents, new car, vacation and the list goes on and on.

The importance of a sinking fund even when you still owe money and want to put it all into the bills is it prevents budget burnout.

You will save and save but at one point, you will burn out and if you don’t take the time to put money away for anything or take a break, this is when you risk falling off the big wagon, especially if you have years of paying off debt to do.

I have a special holiday coming up for our anniversary. I am actively saving a little off every paycheck to cover the cost of that and it’s important that I put that money away and not touch it until I need it and the reason is this; if I don’t save up for it, when it comes around, I would have to use money from my paid credit cards or credit line and then it will feel like I am taking many steps back. If I have that money set aside, my regular payments don’t get affected and I can take a holiday free of guilt.

Guilt free is very important.

I would go as far as saying that even if you are not entirely sure what the sinking fund will be used for, I would still squirrel money away every week, into an envelope or a separate account. Having that extra cash in a pinch or when you finally decide you have had enough and decide to hop on a plane to the nearest hot beach last minute to take a welcome break means you can do it without any guilt and you get your break from being such a good little money soldier all the rest of the time.

I used to find it hard to take from the payoff fund and put that money aside. I kept thinking “but it’s just sitting there, why would I not just put it in the debt repayment?”

Because you should not put money you will end up spending into debt repayment. For all intents and purposes, the money you put on debt repayment, should remain paying off the debt. By making a sinking fund, you are insuring that the money you pay off, stays paid off.

We have to stop making it a habit of thinking that money that is in a credit card belongs to us, like an extension of cash. That money does not belong to us. It belongs to someone else.

The idea is to get off the revolving credit thing! Dipping into paid accounts only makes it easier to revert back to old habits that got you where you are in the first place.


Do you have a sinking fund, or many? What have you purchased with your sinking fund?

Tomorrow’s Blog! Motivational Debt Repayment Sheets! Another Motivational Tool!


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