Graduated Learning: Life after College

I got my degree, I got a job…now what?

How big expenses in 2019 made me re-examine my cash hoarding and love sinking funds January 1, 2020

Filed under: Personal Finance,Personal Finance Confessions — Stephanie @ 7:55 pm

In a previous post, I confessed to being a cash hoarder. After saving money for so long, I was hesitant to let our savings accounts drop below an imaginary threshold.  After some big purchases (new car, new heat system, central air conditioning), I realized that I needed to redefine what our money is for.

That’s when I remembered hearing about “sinking funds”.  I’d seen a few discussions about it, but hadn’t really thought much about it or looked into it.  Luckily Penny (from She Picks Up Pennies) shared some really helpful posts about sinking funds from Women who Money:

What Are Sinking Funds And Are They Smart To Have?

What Is The Difference Between Needs And Wants? [& How Do I Afford Both?] (scroll down to the section “Emergency Funds, Sinking Funds, and Why You Need Both”)

It looks like sinking funds are money that you’re putting away with the knowledge that you’ll be spending it within a set amount of time.  You can add that savings line-item into your budget, knowing you are not planning on spending that amount of money until it is needed in the future.

I’d been stressing myself out thinking about our savings all being for unexpected expenses or loss of income. That I should be afraid to spend money because what if something bad happens? But if we separate the money into “in case of emergency” and “new xyz”, “replace abc”, etc, we can relax knowing we still have a certain amount set aside for unplanned expenses or a loss of income.

Hopefully we don’t have any new big expenses in 2020 (we already know we’ll be spending another $45k on childcare…).  We’ll continue putting some money in savings for our next house expenses (you’re apparently supposed to put away 1% of your purchase price every year).  But I’m going to try to look at our savings accounts differently.  I won’t be as afraid to spend on what we actually need, knowing that we have accounts set aside (and building) for the things we need.

What kind of sinking funds do you have?  Have they helped you feel a little more at ease knowing you’ve got the money put away?


2 Responses to “How big expenses in 2019 made me re-examine my cash hoarding and love sinking funds”

  1. SP Says:

    I use sinking funds, sort of. I use one yearly for property taxes, then I’ve been hoarding quite a bit of cash in anticipation of a new roof. I’m planning on depleting it for the roof and wasn’t planning on replenishing. We do generally try to cash flow most house projects, so our savings rate fluctuates depending on whether or not we have a big project. I do track yearly house maintenance costs and 1% of purchase price is about right for now. I hope it will go down over time as we have been addressing some big things in our older home. 1% of purchase price is a lot in expensive areas, but labor costs are also expensive…

    Liked by 1 person

  2. I used to (still do, actually…) have my massive emergency PLUS sinking funds. I’m trying to feel better about decreasing my EF cash given that we can also dip into these other accounts.

    Oof – I thought our daycare costs were bad at $32K.

    Liked by 1 person

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