Is The Sinking Fund Worthless?
A sinking fund is an important tool used in budgeting and financial planning.
It is money set aside from your personal monthly budget to cover the costs of a large purchase, an emergency expense, or a future project.
A sinking fund can also be used to save for retirement, travel expenses, vacations, home renovations, and more.
To ensure you’re properly setting aside money for these purchases, it’s important to keep track of your expenses and create a sinking fund tracker.
Sinking funds are categorized into two types: High-priority sinking funds and discretionary spending sinking funds.
High-priority sinking funds are funds that you should always have set aside, for emergencies, taxes, or medical bills.
Discretionary spending sinking funds are funds that you can use to save up for items such as vacations or home renovations.
The idea behind a sinking fund is to allow yourself time to save up for large expenses without putting too much strain on your current budget.
By setting aside small amounts of money each month in your personal budget, you will eventually accumulate enough money to pay for the item without having to take out a loan or use a credit card.
So is the sinking fund worthless? No, it is a great way to plan ahead. Learn how you can track your progress with this useful Google spreadsheet.
