In the world of budgeting, sinking funds are probably my favorite thing. Before beginning our debt free journey, bills would come due or we would need to buy propane or Christmas would show up unexpectedly, and we’d be scrambling to find money to pay for the crisis of the moment.
Once we found sinking funds, I was in heaven. You mean that if we save a little bit every month, when we need the money it will be there??? SOLD!
I’m a planner, so I felt really stupid that I didn’t think of this on my own. Regardless, I get it now, and I’ll never go back.
Basically, a sinking fund is a mini-saving account that you contribute to periodically for:
- A specific goal: You want to spend $1,000 on Christmas, and it’s 5 months away. Every month you would save $200.00.
- A need that you know will happen eventually: Your car is going to breakdown. You don’t know when, but it’s probably going to happen, so you save a little each month, and if (when) it does break down, you have a nice little stash of cash to get you through.
In order to use sinking funds effectively, savings account management is essential. So here’s a breakdown of how it works for us that will hopefully give you a starting place or some ideas if you already use sinking funds.
Our savings account categories are:
Alright, I’m going to try and explain how we keep track of the money in our savings account, and if you stick around until the end, you’ll be able to download a Savings Account Management Form of your very own!
Column A: Date
Enter the date that money was either deposited or withdrawn from the account.
Column B: Total
Enter the total amount that money was either deposited or withdrawn from the account. Use a – (minus sign) in front of any withdrawals.
Column C-K: Categories
On the same line as the amount deposited or withdrawn, enter the amount that should go into each category. In the image below, you can see that the total deposited was $357.00 and that was then distributed between 4 categories.
Column L: Interest
As the savings account gains interest, that counts as a deposit. Usually, if my Savings Countdown is off, then I forgot to check the interest that was added for the month. It’s kind of nice to see that category grow a little every month on it’s own!
Column M: Total Categories and Savings Countdown
As you add or subtract from each category, the Total Categories number will respond. This number should be the same as the total in Column B. The Savings Countdown box is there to help double check. In the example below, I forgot to find a home for the $7.00 that ended up in the House fund above.
In the bottom row of each category is the total amount that’s been saved. When it’s time to transfer money to checking to pay a bill, make sure to record that as well.
Hopefully, this gave you some new ideas for savings account management.
Once you get your sinking funds going, let me know what you think!!! You can tag me on Instagram @thesimplegirlsguide, so I can see how you’re using the spreadsheet!
And as another bonus, you can download The Simple Girl’s Guide to a Debt Free Christmas by entering your email below!