Whether you’ve been recently introduced to the concept of sinking funds, or you’ve been implementing them for a while, there’s no doubt that you could be feeling overwhelmed. There are so many things to save for and only so much money that can be saved! All that means is that you need to get strategic. You need to be able to prioritize your sinking funds in order of importance or timing. I’m going to walk you through how to prioritize your sinking funds so you can feel productive, not overwhelmed!

budget categories

How to Prioritize Your Sinking Funds

Prioritize based on timelines

As you know, sinking funds and the amount saved for those funds are determined by how much you need and when. Certain sinking funds (think Christmas, Birthdays, Events, etc.) have a set deadline. Because these types of funds have a set deadline, you know when you need to have your money ready for them.

When you know your deadline, you can prioritize your funds. The longer you give yourself to save for those funds, the less you need to save month over month. This allows you to focus on more sinking funds at the same time.

For any drop-dead due dates, prioritize those funds first. If you absolutely need your money ready by a specific deadline, those sinking funds should be saved for first. Calculate how much you need to save each month by the deadline. Can you afford that? If so, then great, you should be on track! If not, then you’ll need to make up for the losses by cutting back spending or increasing your income.

The deadline is going to come whether you are prepared for it or not, so making these funds a priority as early as possible will help you meet your deadline. This can help you avoid a lot of stress and anxiety around the due date of the sinking fund!

Prioritize based on necessity

Another way to prioritize your sinking funds is by their necessity and importance. Some sinking funds don’t have a specific due date, but they are very important. Some examples include Car Maintenance, House Repairs, and Medical Expenses.

We don’t know when our car is going to break down. We don’t know when we’ll need to unexpectedly cover a hospital bill. Because of this, we need to plan for the unplanned. That’s likely why you have those sinking funds established. However, because there is no set due date for them, these sinking funds could have been placed on the back burner.

Ask yourself – if your car were to break down right now, what would you do? Would you have the money to pay for it? If not, then making your Car Maintenance sinking fund a high priority makes sense. The entire purpose of a sinking fund is to help you save for something specific, so you don’t have to wonder where the money is going to come from to pay for it.

Think about your sinking funds that don’t have a specific due date. Ask yourself how important those funds would be for your situation. If you’d be SOL without any of the funds, make them a higher priority to save for. If you don’t know how much to save for those sinking funds, save what you can afford. Don’t put a due date on when you stop saving for them. Keep saving that $25 every month until you need it, then start over.

get cheat sheet
Prioritize based on your personal needs

I know myself. I need to travel to one new place every year, otherwise I feel burnt out and overworked. Because I know this about myself, I need to be proactive with saving for travel. I have a sinking fund dedicated to travel. While travel may be something I need, it may not be something you need. However, I can guarantee you that you need something!

Our mental health and emotional stability mean a lot. If there are certain things that keep you happy, healthy and motivated to keep doing what’s right, then those things should be prioritized high on your sinking funds list.

Similar to the necessity funds, sometimes your personal needs sinking funds won’t have a set deadline. That means you should save what you can as often as you can. You want to put yourself in a position to utilize the money in your sinking fund when you are ready to take that trip, or get that massage, or see your therapist.

There’s no cap on what your personal needs sinking funds can cover. I do want to caution that your personal needs should truly be needs, not wants. Needs are things that improve your mental, emotional and physical wellbeing. Not everything will do that, though you can convince yourself it will. Be wise about this type of spending, because it can be easy to go overboard.

Prioritize the rest of your sinking funds

Once you have your deadline sinking funds, your necessity sinking funds and your personal needs sinking funds set up, then you focus on the rest. The rest of your sinking funds aren’t as high of a priority, so save what you can without overextending your finances.

Remember, there’s no limit on how many sinking funds you have! Sinking funds make your financial life easier and monetary worries smaller! Embrace the strategic use of sinking funds and you’ll see a difference in how well your budget and money is managed.

 

budget categories

Related: 8 Things Everyone Should be Saving For

Sinking funds can be an overwhelming concept when you don’t know where to start, but the tips above for prioritizing your sinking funds can take the overwhelm away! Keep your focus on the most time-sensitive and most necessary funds first. The rest will fall into place!

How do you prioritize your sinking funds? Which sinking funds are most important for you? Share your sinking fund thoughts and experiences by posting a comment below!

-Raya
The CGS Team

Raya ReavesFounder; Financial Consultant