My 2022 Sinking Funds | Saving Tips

welcome to the budget mom youtube channel i'm kamiko love from thebudgetmom.com and today we're going to be doing a video all about preparing for the new year 2022. i thought this would be a good video to post because everyone is thinking about their financial goals for the new year saving for new things in the new year and one of the best ways to do that is by utilizing and using sinking funds [Music] so today we're going to be going over how i determine my sinking funds for a new year what i'm going to save for how i'm going to do that but before we jump into my specific thinking funds let's talk a little bit more about the basics if you're new here to the budget mom and have not heard the term sinking funds it's kind of a weird term what a sinking fund is it's saving a little bit every single paycheck for a planned or expected purchase in the future okay how is that different from your emergency fund right we might be saving a little bit every month or paycheck for our emergency fund so a sinking fund is planned and expected okay we're expecting and knowing that that purchase is going to happen in the future an emergency fund is planning for the unexpected right we don't touch our emergency fund unless it's for true emergencies and true emergencies we really never know when they're going to pop up in our lives sinking funds we do so that's what a sinking fund is saving a little bit every single month or paycheck for a planned expense or purchase in the future now this could look like a holiday an event maybe even a new car purchase a vacation okay those are all examples of sinking funds and you're going to get a lot more examples when you see my sinking funds we're going to go through a worksheet also together so i can show you how i create these in my real life now what's the difference between a sinking fund and a goal they're very different a goal is an outcome a goal is something that you expect to accomplish or reach a sinking fund is how you reach that goal okay it's the small routine actions that you take in your life to reach that desired outcome also i want to answer some questions that i get every single day when it comes to either my savings or my sinking funds number one do i save for my sinking funds in cash now if you look at all my envelopes kathy i'm gonna this might be overwhelming for you at first when you see these but these are all my sinking funds it's a lot and when you're looking that it might seem a little overwhelming some of my sinking funds like these that you're seeing here i save for in cash my bigger sinking fund goals like my property taxes my house insurance those are saved in separate savings accounts at my credit union and so yes all people ask are they truly separate savings accounts yes i bank at a credit union that allows me to have as many savings accounts as i want without any minimums and without any fees so it works for me in my life if you're looking for something like that also i recommend to check out credit unions over big banks because credit unions are member owned and you're going to probably find less fees and restrictions there with your savings and checking accounts so that's one question oh and let's go over why i like to save so i usually save things like holidays and events things that i'm gonna i know i'm gonna be spending for throughout the year like christmas i'm buying christmas gifts throughout the year i like to save those in cash because i like having quick access to my event cash syncing funds that's just me though so this is whether you save in a separate savings account whether you decide to use a high yield savings account or whether you decide to save in cash is completely up to you and how you feel comfortable managing your money and your goals but this is how i like to do it now if i do want to mention one thing if you do plan on saving for your bigger sinking funds like let's take for instance my property taxes my property taxes are over eight thousand dollars a year my property taxes come due in april so i have to have a big chunk of change ready in april to pay those property taxes that might be a sinking funds i would hold at a high yield savings account because i know i only have to access that savings once a year right i'm not going to touch it other than using it to pay for its intended purpose the reason i say that is because high-yield savings accounts usually have a six transfer limit so if it's a savings account that you're going to be dipping into and having all these different transactions multiple transactions a month then i would suggest not having the high yield savings account and doing it in cash or a savings account at your credit union your bank so you have access to those funds without worrying about your withdrawal limit okay so another question i get is mikko aren't you terrified of having all this cash in your home so i save all of my sinking funds and cash any cash here at my house is held in a fireproof safe in a safe location in my home it's something i feel comfortable with doing and that's how i currently store and hold my cash that i save the next question is mikko how many sinking funds should i have isn't it funny how when we start saving for things everything seems important right we want to save for all the things and so what would we do we implement all those things into our budget and then at the end of the day we sit back and say well i don't have enough money it's because we're spreading ourselves and our income and our budget so thin trying to accomplish and save for everything that we want so the main thing with sinking funds it's all about prioritization in our lives and simplifying right it's not meant to save for 30 different things and have five billion envelopes that you're saving for it's about having a strategy based on priorities in your life they're going to be some things that you're not going to be able to fit within your income limits and your budget for a thinking fund that you're going to have to cash flow a perfect example of that is birthdays right i don't know if you have a lot of people in your life that you are celebrating birthdays for every year if you take up if you add up all the birthdays that you celebrate throughout the year how much does that equal you'll be surprised it adds up especially if you're buying gifts and celebrating birthdays for 50 people throughout the year guess what you might not have it in your budget to have a sinking fund for birthdays in your life so you have to learn how to cash flow meaning using the paycheck for that current event instead of saving a little bit each month i get a lot of questions also mikko i have debt should i be saving for a sinking fund if i have debt now if you've been following the budget mom for a while then you know that my motto here is you should not have to stop living your life because you have debt you don't start you don't stop living because you have debt and i'm also the type of person that feels like life is too short we need to take advantage of this wonderful life that we have now even if you have debt what does that mean it means responsible planning so when i had debt and i was paying off my 77 000 worth of debt i did have a sinking fund one sinking fund and that was christmas why it's because it was an event that happened every single year where i felt pressured to use my credit card and every single year i found myself going into credit card debt over and over and over again for christmas so i knew that in order to stop that cycle i had to work it in my budget and prepare and plan responsibly for that for christmas spending so i started a sinking fund was it a lot when i had debt no i think it was like i saved a total of 200 but that was the first time in my life that i learned to save responsibly and to be fully prepared with cash for an event that used to put me in credit card debt so it's up to you to know your priorities in your life remember no one knows your finances and your money better than you sometimes we have to take that and put trust in ourselves to make the best decisions because you're ultimately the one who knows best when it comes to your finances so let's look at right now my sinking funds for 2022 and the process that i use to figure out the amounts and what i'm going to save for in the new year so the first thing i want to show you it's called the sinking fund savings tracker now you can find this in our free resource library i'll make sure to put a link in the description below of this video this is the tracker and the worksheet that i use to figure out what my goals are my savings and sinking funds are for the new year now over here i have goals listed now you might be asking mikko i don't even i haven't started this process before i don't even know what to say for so the first thing you need to do is you need to look back at the previous year and say okay what did i spend my money on what did i what was a event that pops up over and over again in my life where i'm pressured to use a credit card where i want to be a little more prepared financially for that event or purchase now i want you to think about holidays events birthdays maybe you have a vacation you want to start saving for or you know you have an upcoming wedding that you need to attend okay look in the past and look in the future so here are my sinking funds for 2022. i have my boyfriend's birthday 4th of july my son's birthday back to school christmas valentine's day property taxes sports bulk grocery runs my disport house maintenance car maintenance vacation pest control and house insurance now you might saying oh my gosh mikko that is so much stuff let's talk about different financial situations i am debt free so what you are seeing is someone who can prioritize saving in their lives differently than someone who might has debt so this might look very different for you you might only have just these top two lines just two sinking funds maybe you just have one that's fine but the reason i have so many is because i am debt free and i am able to allocate my funds a little bit differently so you write down your goal if you are seeing a green dot on this worksheet it's an online transfer that means i am not saving for those things in cash i'm saving for those in my in my savings accounts at my credit unions right i don't have an envelope where i'm saving for it in cash if it's pink i'm saving for in cash so that's a great way for me to visualize and see the difference between those two now let's go through one goal so you can see how i work this out let's for instance let's look at my son's birthday so every year i save 400 i take 12 months and i save up 400 dollars for my son's birthday okay there's the goal amount here's the goal the goal amount my son's birthday is in august now i like to prepare my sinking funds where i have the money saved a month before i need to spend the money so if my son's birthday is in august i want to have that money ready for july that gives me a full month to either buy presents or to plan the party or to plan the event it gives me the money for a full month so i can really make sure i have time to spend it in the best way possible for that event so if that's the case if i start my sinking funds in january of 2022 i have seven months to save for my son's birthday now last year in 2020 one i didn't use all four hundred dollars for my son's birthday so guess what i decided to use anything that i didn't spend for his birthday in the new year so i already had 163 dollars of my 400 goal saved which means i still need to save 237. if i take the 237 and divide it by the number of months i have to save which is seven i have to save 34 dollars every single month to hit my 400 goal by july of 2022 this is a great way to see the difference between a goal and a sinking fund this is my goal the 400 this is how i'm reaching that goal 34 dollars a month it's going to give me the desired outcome of 400 by july of 2022. so you're going to do that for each one of your goals now so you can see okay the ones highlighted in yellow for like christmas at the time of this recording for this video christmas hasn't happened yet for 2021 so guess what i might still have some christmas money that i didn't spend this year that i want to save and spend for next year so i still have to fill in these blanks for that specific goal now you can see some of these have goal amounts cinema do not they say ongoing what does that mean sometimes when you have a sinking fund you're not going to have a specific goal amount sometimes you're just saving a little bit every single month like for instance my bulk grocery runs i don't have a goal amount like i don't say i want to save a thousand dollars for this goal why because i'm constantly spending saving spending saving throughout the new year so costco i save a hundred dollars every single month period full stop hundred dollars a month is what i save now this is my costco sinking fund envelope i saving cash for this i'm just going to pull this out here for you this is what an ongoing sinking fund looks like you can see that i'm adding a hundred dollars every month but guess what sometimes i spend it on going like on august 5th of 2021 i spent 450 415 dollars it left me with 127 dollars in cash then i added to it again and i'm still adding to it now i'll put links to these spending trackers as well as where you can find these sinking fund envelopes in the description of this video if you're interested but these are the ones that i use for my ongoing sinking funds so that's an example of an ongoing sinking fund in my life i'm saving a little bit every single month no matter what because i'm constantly spending from that sinking fund the same goes with like my son's sports you can see there's he's in sports all year long it's not just one single time i need to make one purchase so my son's sports looks a little bit different i'm saving 27 dollars a month for his sports and sometimes we use it and sometimes we don't guess what over the last couple of years my son hasn't had any school sports so i'm just adding to it okay you can see i have all this cash in here and i'm just adding 27 a month because that way guess what when my son does get back into his wrestling when he does get back into his parkour when he comes to me and says mom i really want to do this sports camp mom i have a wrestling tournament over the weekend and it's saturday and sunday i have cash for snacks i have cash to put him into parkour lessons i have cash for his new cleats his new headgear for wrestling okay that's what this is for so that's how i handle that that is an ongoing sinking fund so let's talk a little bit more about my thinking funds envelopes that i use so i use these sinking funds envelopes it's where i save all of my cash they have these trackers on the back now you can see here remember when we talked about my son's birthday and i said i have already 163 dollars saved that's the cash that you're seeing here so i'm starting 163 dollars in my envelope and for my son's birthday i have a 400 goal that's what this tracker is for i like to see [Music] individually what my progress is for each sinking fund and i don't want to have to go and count the cash every single time for every single sinking fund i want to see it very visually in like a second that's what these trackers are for so when i add cash i just color in the lines every single time i get to that amount so i can see visually what my progress is for each thinking fun like you can see back to school i can see within a second i am almost at that goal okay sports i'm about halfway chris's birthday i don't start saving for july so i don't start saving until january so it's blank of course okay i hit my cash 500 maintenance goal that's why the tracker is filled out so that's and i'll put links to these envelopes in the description of this video and you can see like here is valentine's day that i saved all through 2021 that i'm going to use in february of 2022 but i still got to start i'm going to keep saving for valentine's day hence the new envelope for 2023. okay so that's what my thinking funds and i have a new one for christmas that i'm going to be saving for starting in january this is for christmas of 2022. i have my christmas for 2021 saved right here two thousand dollars that i spent the last 12 months saving for and you can see here's me saving every single month for my christmas goal so two thousand dollars for christmas spending and holiday spending now i do use this for black friday i do use this for christmas shopping christmas decorations christmas food christmas presents this is all my holiday spending two thousand dollars is a big amount could you imagine trying to cash flow and planning for this last minute look at all the small progress that i spent throughout the entire year getting to that amount see how it's not such a huge hit to your budget small amounts versus coming up with two thousand dollars at the last minute or maybe it's not two thousand dollars maybe it's 500 and if you're working on a really tight budget maybe it's 200 and that seems impossible if you save up five dollars every paycheck or ten dollars every paycheck do you see the difference how it's not such an overwhelming burden or hit to your budget so that's currently what my sinking funds look like i want to take you very quickly inside of the budget by paycheck workbook this is the new budget by paycheck workbook and i'm going to start filling these out in january but in the beginning of the workbook you have what's called sinking fun saving visuals remember how i told you i like to see individually how i'm doing with each goal i also like to see how i'm doing with all my goals on one view so i each one of these will be a sinking funds goal and i'm going to color in these little blocks for my progress for each one then i can see where i'm at total for all my goals in a very visual way within one couple of seconds so this syncing fun saving visual is inside the budget by paycheck workbook if you have this that is there for you to use and i highly suggest you do implement these trackers into your life why motivation seeing your progress sometimes when we make such small progress or small actions to reach such a large goal in january this might have felt like oh this doesn't matter i'm never going to hit my goal this small amount is not it's like a drop in the bucket but you see how it adds up these trackers work the same way you get to visually see yourself making progress in small ways every single month or every single paycheck so implement these trackers into your life if you are working with syncing funds or saving goals in general so before i end this video i want to talk about going beyond the numbers sinking funds for me was always more more than just saving dollar amounts for me what sinking funds gave me was stability and peace of mind in my life and i cannot tell you or even put a dollar amount on the value of that as a single mom there's enough stress enough chaos enough doubt in my life as a single mom already where i felt like having the stability and peace of mind of knowing i don't have to worry about that expense i don't have to worry about coming up with money for my son's birthday or his sporting events right or christmas getting him a present that i really want to give him or an experience a sleigh ride or going out on a christmas cruise i can afford that and as a single mom who once struggled that means everything we can never put a dollar amount on peace of mind but it also gave me the confidence to be able to know and trust myself to make the decisions i needed to with sinking funds in my life to give me that stability and peace of mind so today i challenge you to look ahead in the new year and think about that event or holiday or purchase in your life that pops up every single year that you feel pressured to use your credit card now using a credit card isn't bad that's not what i'm saying but using a credit card because you have no other option and you can't pay for it and you spend on your credit card anyways that's what i want to try to alleviate for you is that type of pressure so we work within the confines of our budget of our income but we want to utilize our money in a way where it works the best for us and what's the best for you might not be what's best for somebody else your sinking funds might look very different from mine it might very look very different from a friends or anybody else in the tv and family community and that's okay maybe you have no sinking funds because your main whole goal in 2022 is paying off debt the only word of caution that i give you for that is remember paying off debt isn't just about paying off debt now it's ensuring that you don't go back into debt in the future and one of the ways that that keeps you from going back into debt in the future is learning to manage your money to plan and prepare responsibly so sinking funds helps you do that if you found this video helpful please like it and don't forget to subscribe [Music] you

Channel: The Budget Mom

Views: 120,858

Rating: 4.9343705 out of 5

Keywords: sinking funds, sinking funds categories, sinking funds and cash envelopes, budgeting for beginners, sinking funds explained, how to save money, sinking funds set up, sinking funds for beginners, debt free journey, paying off debt, zero based budget, the budget mom, saving money, saving money tips, save money, finance, budgeting, savings goals, money, budget by paycheck, budget mom, sinking funds 2022, saving money 2022, personal finance, how to budget, how to create a budget

Id: 7R4L-kaBfl8

Length: 26min 5sec (1565 seconds)

Published: Sat Nov 20 2021