Saying that sinking funds changed my and my husband’s life might sound like an exaggeration, but I promise you it’s the truth. Our financial wellness has significantly increased this past year. Why? We found Dave Ramsey in November 2018 and started our journey to financial freedom.
Since then, one of our primary focuses as a couple has been tackling our mountain of non-mortgage debt to the tune of $191,433. I’m happy to report that we have paid off just over $75,000! Financial freedom is still a long way off, but the road is paved and we know we can do it.
Had we not found out about sinking funds though, that total payoff number would look a bit different, and our financial wellness would not be as in intact, like it is now.
Finding Like-Minded People
If you are new to the debt-free community, I suggest following this hashtag #debtfreecommunity on Instagram. Finding like-minded people is another big factor in our financial wellness. When you have others going through the same struggles that you are going through, or those that have gone through them, you immediately have a connection.
It was in this group that I found out about sinking funds. Sinking funds are different from an emergency fund in that they are non-monthly recurring expenses. Some sinking funds could be set up for the following expenses: car insurance or life insurance premiums, an upcoming vacation, or replacing a fence that the HOA keeps sending letters about.
How Sinking Funds Improved Our Financial Wellness
When we initially set up sinking funds, we started small. We started with the following sinking funds:
- Life insurance premiums ($116/month)
- Child ($80/month)
- Car ($160/month)
- Miscellaneous ($25-75/month)
Just as an example, the car sinking fund has come in clutch more times than I can count. How?
- Replaced four tires
- Had AAA come and replace a battery
- Funded an unexpected trip to the car shop when my car was stalling
Now that we are seasoned “sinking fund-ers,” we have revamped the funds into the following categories.
- Life Insurance Premiums
- Moving Fund
- Taxes (gah!)
Assigning every dollar a name has become a game in our house. Having these sinking funds puts our minds at ease. We no longer have to worry about what bill we will not pay if a situation, like needing new tires, comes up unexpectedly.
An Inconvenience, Not an Emergency
We had the money in our savings account waiting for the day it was going to be used! Each time, with the click of a button, I was able to transfer the money from our savings account to our checking account, swipe our debit card, and be on our way.
What could’ve been an emergency was just a slight inconvenience.
If you visit my page, taking KARA myself, then you will see that a big focus of my family is getting out of debt. If you don’t know where to start with setting up your sinking funds, I’m happy to be a sounding board. I cannot speak highly enough of our sinking funds and how they have saved our financial wellness!