3 Ways to Use Sinking Funds in the New Year

It’s November.

That means that next month is December.

Which means the month after that is 2020. Insert all of the wide-eyed emojis.

This post will help make sure that 2020 is the year that you’re ready for all of life’s expenses both expected and unexpected. So, get ready because I’m going to give you one of our secrets to feeling financially secure even though we really don’t make a ton of money.

The best way to prepare for upcoming expenses is by using sinking funds.

Simply put, a sinking fund is a mini-savings account that’s dedicated to a specific expense. You save a little money each month, and when the expense comes up, you pull out of the sinking fund to pay it.

You can use sinking funds for pretty much anything, but here are 3 ways to use them that will help you get ahead and feeling financially secure in 2020!

Photo by Malte Lu from Pexels

Deductible and medical expenses

While you can’t always predict what your medical expenses will be, you can have a good idea of what you’ll need to start with by determining how much your deductible and out-of-pocket amounts are.

It took us awhile to get to where we needed to be with our medical sinking fund because as we were trying to build it up, we were also paying the current year’s deductible. Now that we have a fully funded deductible sinking fund, we’re able to pull from that during the year while simultaneously adding to the next year’s sinking fund.

If you’re just getting started, here’s what I would do:

  1. Determine the amount you will need to save each month to fully fund your medical sinking fund for next year (2021!).
  2. Save that amount each month and keep track of how much is in that sinking fund using the free tracking spreadsheet.
  3. For the current year’s expenses, either budget them into your monthly expenses or double the amount you’re adding to your sinking fund each month to build a cushion for this year.

Getting started with this will be hard because as you’re saving for next year, you’ll have expenses this year.

But, think about how it will feel at the end of the year when you look at your account and know that your deductible is covered for next year!


April is four and a half months away.

Tax time is coming. It always does.

If you’re in a situation where you typically owe taxes in April, start a sinking fund now. Whether it’s for your business or your household, get a good estimate of what your tax bill will be. You can even meet with your accountant to get their input and estimate.

Once you have the estimate, you can start right now and save a set amount towards it each month, guaranteeing that when the time comes, you’ll be able to pay it without scrambling.


Three of our sinking fund categories are for insurance: life, car, and house.

These numbers can vary from year-to-year, but we always end up within about $50 of the bill each year. The difference just gets budgeted into that month’s expenses.

Even if you’re not sure of the exact amount, you can always use the previous year’s amounts and your best guess. Because even if you’re off a little, you’re closer than if you hadn’t saved anything!

The great thing about sinking funds is that they are very intentional. You’re not just saying that you’ll save some here and there. You know exactly how much you have to save each month to reach your goal.

To help you plan your sinking funds, you can download the Sinking Fund Planner below!

If you want to learn more about sinking funds, you can check out my post on sinking funds and savings account management and download a tracking spreadsheet to help get you started!

4 thoughts on “3 Ways to Use Sinking Funds in the New Year

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