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Tapping Into The Importance Of Sinking Funds, Planning And Organising Your Financial Wellbeing

 

Hello lovely !! 💖

Today’s blog will be about sinking funds, upon reflecting on my blog post about financial wellness, this is an extension of ways we can go about the mission to improve financial wellness.

Including a step by step guide + plan, this enables us to break down important points to help comprehend the crucial uses of sinking funds.

🤞🏽I hope this blog enforces you to become disciplined and willing to improving financial well-being, for yourself and future.

Let’s tap in;

Sinking funds are a great way to get ahead in taking your budgeting and managing of your finances to the next level.

It’s also about planning ahead for future expenses so that you are content and have peace of mind when the time comes.

Sinking fund vs emergency funds

In my post on financial well-being, I point out the idea of having an emergency fund of 3-9 months. It’s important to develop this first before starting your sinking funds. You can have an emergency fund as a sinking fund, However I think it's important to separate these as sinking funds can get more confusing. I really want to stress behind the idea of having 3-6 months of finances saved and having that put aside.

Sinking funds is essential needs and wants that are personal to you. I think it is safer to work towards an emergency fund first, god forbid you don't lose your job.

In a time of uncertainty, we cannot afford to not have an emergency plan or exit.

This applies for emergencies such as medical care, money to disappear, food and water stock, home repairs, car finances. Your emergency fund should be reserved for something that comes at you unexpectedly.

Once you have this in place, choose 6 important categories that you would love to contribute to your sinking funds. (Wants/Needs)

Step by step finance planning

  1. Decide what you are saving for

  2. Determine how much you can afford to contribute. How much do you NEED?

  3. Choose your account type/cash?

  4. Set up automatic deposits each month


Why is a sinking fund prepared? Or what can it be used for?

“sinking fund is a fund of money that you intend to spend on a particular need or want at some point in the future.”

The highest age ranges that struggle the most is understandable. We aren’t the most experienced and we are only just getting our lives started and figuring out many different things. We haven’t been taught the importance of finance or how to manage it to our best advantage.

This is a gentle reminder that you aren’t alone and it’s never too late to try again. I have had countless money regrets in the past, and its very easy to dwell on those things, however I refuse to let my PAST mistakes define me now.

NOW I KNOW BETTER🧚🏽‍♀️

Why does categorising sinking funds matter?

The purpose of a sinking fund is to save cash for specific expenses. That can include one-time or irregular expenses.

Categories matter because they ensure the money gets allocated to what is a priority within your sinking fund. An elite skill of money management which is turned into a daily habit. It's also great for tracking progress overtime under any circumstance.

Benefits

☑️Lose any guilt associated with large purchases.

☑️Getting specific to make sure you cover everything you want or need

☑️You don't have to pay for things all at once, and you keep your finances in good shape

☑️setting up a sinking fund with specific categories can help you take those budgeting skills to the next level, so you’re prepared for every aspect of your life.

Example categories for sinking funds

You may be wondering, what are considered sinking funds? How many sinking funds should I have ?

Let’s not try to overwhelm ourselves. Ideally, 5-6 is a great start for choosing your important sinking funds category balance.


Final thought

A sound budgeting practice is crucial to financial stability (and wellness).

There's gonna be a time when you want to give up. Overspending, too many things happening at once, or getting stuck with unexpected expenses may occur. When you cannot cut back anymore, try different methods, adjust categories, or earn more income. It is possible for you to live the life you desire by doing this.



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