Set a Goal
Sinking funds are surrounded by goals or aspirations that you have for your future. Sinking funds is a great way to help you accomplish your goals.
For example, I want to take a family trip to Disney World for myself and the husband.
Creating a sinking fund can help me to reach this goal without scrambling for money at the last minute.
Create a timeline to reach goal
After setting a goal, a timeline needs to be defined. A timeline is important to understanding how much money you need to set aside each month but in order to do this you need to ask yourself a few questions.
✔️How much is a flight to Disney World for 2 people?
✔️How much is 2 tickets to Disney world?
✔️How much is a hotel in Orlando?
✔️How much money will you need to eat & shopping?
✔️When would you like to go?
So let say the answers are as follow:
✔️How much is a flight to Disney World for 2 people? $600
✔️How much is 2 tickets to Disney world? $500
✔️How much is a hotel in Orlando? $600
✔️How much money will you need to eat & shopping? $700
✔️When would you like to go? In 18 months
This tells me that I have 18 months to save roughly $2,400.
Auto deposit $ into sinking fund account
If you do not already have aa savings account that is separate from your checking account, then create one. Separating your money accomplishes a couple things.
✖️Removes the temptation to spend that money
✖️Allows you take advantage of being paid out at a higher rate by utilizing a high interest savings account
Sinking funds are one of your greatest weapons. Let me know what you plan on savings for? Maybe a trip to Jamaica once the world opens up?