![]() But you don’t want to mess up your budget by having to take the full $125 from that month to pay the quarterly bill. For example, your car insurance is paid quarterly. A sinking fund is simply a category in your budget that captures these upcoming expenses and allows you to put money in it each month that will collect until you need to pay for it. So how do you that? You put “sinking funds” into your budget. While these aren’t monthly expenses, you still need to account for them each month so that your budget isn’t sidelined when the bills come due. Think about quarterly insurance payments, digital annual subscriptions, medical copays, home improvements and gifts for the holidays. What are sinking funds and why are they essential to your budgeting and overall finances? What are sinking funds?įor many of us, we have certain expenses that occur regularly but not every month. When you are budgeting, the best way to do that is to add what are called sinking funds to your budget. ![]() Yet, they still happen regularly, so you have to plan for them. Some expenses come around every month, but many do not.
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