How Creating a Sinking Fund Can Eliminate Stress

It's impossible to save for everything but you can surely try! Having a Sinking Fund can make a sticky situation where you're short on cash easy to handle. Say goodbye to worrying about how you'll pay for an unexpected flat tire and hello to adulting and peace of mind.

We've all had a sinking fund at one point whether we realized it or not. The money that we stashed and dipped into when we were short on cash, was in fact a sinking fund.

Having one will not only make your life less stressful, but you won't feel bad about spending money on well... anything

Saving with a purpose can make planning for the unexpected easier to juggle and balance. Life can be hard enough without having to worry more about money.

Keep reading to find out what a sinking fund is, why you should have one, and a few frequently asked questions.

Related Post: This is why you can't save money

What is a sinking fund?

A sinking fund is money put aside for the purpose of spending and is not meant to be saved for a long period of time. It's not money you'll carry with you until retirement, or have put away for a an unexpected rainy day.

Creating a sinking fund

Instead you'll use it when you realize you don't get paid until tomorrow but you want to go shopping today. Another example of a sinking fund can be saving saving up for a new phone or knowing that a large (or typical) reoccurring expense is approaching such as rent, annual fees, or tuition.

Spending from a Sinking fund can include keeping track on a spreadsheet or it can include simply taking out what you need. Just make sure any cash (or withdrawals) from a sinking fund are acknowledge because the worst thing you can do is think you still have money saved and your piggy bank is empty.

Do I need a sinking fund?


Earlier we learned that sinking funds can be used to cover expenses that you're planning for such as tuition or a recurring bill. But the idea that most people enjoy thinking of is planning for new purchases.

If you want to save for a tablet, instead of taking half of your check and buying it, you can put $100 to the side, and keep adding money until you have enough. The point of having one or several sinking funds is that you can eliminate financial stress and financial anxiety.

Stress over bills and simply living should not be as common as it is in todays society. Not only can stress cause harm to your body and weaken your immune system and even promote aches and pains but it genuinely does not feel good.

Life is cruel enough to us. There's no need to be unkind to ourselves - Bodhipaksa author of This Difficult Thing of Being Human

Financial anxiety can be decreased

Is it the same as my emergency fund?


Your emergency fund is for emergencies. It's for the COVID disaster that corrupted 2020 and left too many people unemployed. Emergency funds are also for broken items, losing your wallet, emergency flights, or whatever else your lifestyle deems an essential emergency.

The goal for an emergency fund is different. Hopefully it will never be spent before you're actually in a situation where it's necessary. If you found yourself needing extra money then you would use your sinking fund and replenish it afterward.

A car accident, being short of rent money, a sudden flight, even a medical bill can count as an unexpected event.

What can I spend my sinking fund on?

You can spend it on anything that you want to plan for.

Maybe you know the following semester you'll have to pay for a class or that you want to go on vacation and have spending money.

Another example, is wanting to plan for a date night. A Christmas Fund is a HUGE way to prevent holiday blues and not bring unnecessary bills into the new year.

From each check you can put money into one fund [or into multiple] and when you need it, the money will be there.

A sinking fund is for vacations too

How do I budget for it?

You can do it the same way you do any other basic budget. Add up your expenses subtract it from your income and see what's left over.