How Sinking Funds Work!

Sinking funds will look different for every budget. Find out how often you can add to your funds and how to figure out how much you can add based on your budget without feeling overwhelmed.

How to Determine How Much and How Often to Contribute to Your Sinking Funds:

As noted earlier, sinking funds are based on each individuals budget. In order to determine how much you can contribute to your sinking funds, you need to understand what your income, fixed expenses and variable expenses look like.

Salary Job - Set income/paychecks: Easiest to calculate because you already know how much money you have coming in every month. Whether you get paid weekly, bi-weekly or monthly.

Hourly Job - Set paychecks but variable hours: Pretty easy to calculate but your numbers may change depending on the amount of hours worked.

Freelance Job - Inconsistent income: Fluctuates in the calculations depending on how much you income you bring in.

Contribute to your Sinking Funds monthly,

1. Calculate what your total income is for the full month.

2. Subtract your fixed expenses ( Bills: ex. rent, mortgage, car payment utilities, subscriptions etc.) from your total income

3. Subtract your variable expenses (Groceries, personal spending, gas, eating out etc.)

4. This will leave you with what you have remaining. From here, you determine what to you CAN add to sinking funds every month.

You do not have to contribute all that is remaining (some could go into savings etc.) but this will give you an idea of a realistic number you can work with.

Contribute to your Sinking Funds bi-weekly,

1. Determine your bi-weekly paycheck amount.

2. Subtract your fixed expenses that occur within the next 2 weeks ( Bills: ex. rent, mortgage, car payment utilities, subscriptions etc.) from your total income

3. Subtract your variable expenses you set for the next 2 weeks (Groceries, personal spending, gas, eating out etc.)

4. This will leave you with what you have remaining. From here, you determine what to you CAN add to sinking funds every 2 week.

Contribute to your Sinking Funds when you can (freelance),

In some cases, individuals cannot always determine a set amount to contribute to your sinking funds, and THAT'S OKAY! Whenever your find yourself receiving money, follow the same steps above, make sure all your fixed expenses and variable expenses are taken care of and whatever you have remaining is the amount you have to work with.

NOTE: If you cannot contribute to your sinking funds consistently, IT'S OKAY :) Add to your Sinking Fund as often or as little as you can!

“Sinking funds are not meant to cause you stress. It is meant to relive stress in unexpected times.”

Check out this video for an example: