>Sinking Funds

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Awww…sinking funds. To me this is the most difficult thing to manage in my personal finances, it would be easier to have a piggy bank for each category. For those who don’t know the term “sinking funds” they are just things that I am saving up for. You can see a more detailed explaination at Simple Mom.

I recently turned my sinking funds upside down when my cell phone broke. To replace the phone cost me $199 plus tax after a mail-in-rebate. I used the money that I had saved this year. So I decided to reorganize the sinking funds and add cell phone replacement to the list.

To manage my sinking funds I use a ING Savings account, which I have labeled Misc. Savings. Each year I need to pay lump sum payments that add up to about $3474. I hate to have any one of these things hit any of my budgets, so I use sinking funds and only take $289.5 per month. Currently I have sinking funds for:

• Car Insurance: $595 every 6 months ($100 per month)
• Renter’s Insurance: $187 annually ($15.58 per month
• Term Life Insurance: $190 annually ($15.83 per month)
• Identity Theft Protection: $72 annually ($6 per month)
• Nutritionist: $200 ever other month ($100 per month)
• Christmas Fund: $500 annually ($41.67 per month)
• Cell Phone Replacement: $125 per year ($20.83 per month)

To keep track of what is going in and coming out of each category I use a spreadsheet to track monthly total based on transaction each month. I have sent up automatic transfers from my ING Checking to my Misc. Savings account for each category. I used to do this each payday, but over the next couple of months I will be changing the approach to only make one transfer per category per month. This will definately save a little time.

Luckily money doesn’t transfer out of the saving account often. So when the payment is due, I will transfer the money to the checking account so the payment can be made on time. Christmas is a little tricky, so I just take it out all at once in cash.

How do you manage your big payments?