Discouraged, But Not Destroyed
I often discuss the importance of sinking funds. If you're new to the concept, a sinking fund is a named savings account with a specific purpose. Funding said savings account is baked into the rhythm of a monthly budget, slowly building up over time for its eventual use. These types of accounts work great for lumpy expenses:
Car Maintenance
Medical Expenses
Travel Costs
House Repairs
Kids Activities
Vet Bills
Here's how to know if something in your life would make for a great sinking fund. If a certain expense could smack you in the face out of nowhere and, in doing so, immediately sabotage your finances, that would make a great sinking fund.
This brings me to my day. In a few hours, I will load my car onto a tow trailer and sit next to a tow-truck driver for a 4.5-hour trek back home. The cost for this marvelous tow / Uber ride? $750. Yeah, it's gonna suck. I drove my 350Z to the cattle ranch this week, and as I was nearing my destination, I heard some unpleasant sounds coming from the engine. There's a chance my engine is toast.....there's a chance it isn't. We'll have to wait until after my $750 tow to find out. It's a mess. I'm frustrated. I'm discouraged. The good news, though, is that I've been funding my car maintenance sinking fund each month for the past 21 years.
Today could have wrecked my finances. It could have imploded us and caused tremendous tension in my marriage. Instead, thanks to the sinking fund, it's just going to be really, really frustrating. We have about $1,400 in our sinking fund ready for such an occasion. I'm grateful we had the discipline to fund this sinking fund each month, even when more enjoyable options were on the table.
Sinking funds are game-changers. In fact, many coaching clients tell me that setting up sinking funds was one of the biggest decisions they made during their ongoing financial journeys. Perhaps it's time to set one up today.....
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