Let’s imagine for a moment that you are doing awesome with your budget and are on track with your bills and you feel like a rock star!
But then you have to pay for your daughters quarterly dance fees that cost you $450 or you have your $750 annual condo fee hit, and suddenly, your budget is busted.
The truth is these expenses feel like surprises, but they shouldn’t be because these are well known expenses that should be part of your budget.
However we focus so much on our monthly budget that we don’t properly plan for expenses that occur annually, quarterly, or every couple of months.
So how do we solve this problem so we are not surprised by these types of expenses? The answer is a sinking fund!
I will walk you through what a sinking fund is, what the benefits are, how to set one up and with who.
Just PAY close attention and read this to the end…
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Now let’s get into why you need to set up a sinking fund…

What Is a Sinking Fund?
According to Dave Ramsey a “Sinking fund is a strategic way to save money for a specific purchase by setting aside a little bit each month”
The way sinking funds operate is every month, you save money money in one or multiple buckets that can be used at a later date.
Following this strategy you are saving up small amounts of money over a longer period of time instead of having to come up with a huge lump sum of money all at the same time.
Sinking funds are the best way to save up and cashflow major purchases!
Dave Ramsey Sinking Funds And Financial Programs
I am sure you have heard of Dave Ramsey by now but if you haven’t he is a financial guru with a talk show, numerous books and a website.
Dave had financial trouble when he was young and had to file bankruptcy from which we recovered. Based off his experiences he has devoted his life to helping others get out of debt and put proper financial methods in place.
His most popular book is Total Money Makeover, which I highly recommend to read if you haven’t yet. He also has personal finance education products like the Financial Peace program.
What are the Benefits of Sinking Funds?
I’ve come to realize that spending money can be a fun experience or a disastrous one! At the end of the day however, no matter what you are spending money on, it all comes from the same place. And sometimes every swipe of your debit card can leave you feeling down and out.
We all have things we want to do with our family like go on a vacation to a beach side location… there goes $2,000. Or you have not so fun expenses like a new roof… there goes $5,000 or more. Next you have a down payment on your first home, then there are Christmas gifts and that boat you have to have.
Every family can benefit from a sinking fund no matter what your tendencies are when it come to spending money… free spirit or near, saver or spender, experiences or things.
The way to better be prepared is by adding sinking funds to your budgeting routine.

What Is A Sinking Fund Used For?
A sinking fund is used to avoid using credit cards or going further into debt. If you know you want something, you plan ahead by saving in specific sinking fund classifications, and save money to cover each expense.
Also, a sinking fund is money that you’ve saved up before something unexpected happens which means you are plan ahead for expenses you know will eventually pop up. Some examples are bills that aren’t paid monthly like membership fees, or house maintenance, and vacation sinking funds.
You can use a sinking fund for the following:
- Inevitable expenses – These are what are known as emergencies, but they don’t have to be if you start saving for them. When your appliances are getting old, start saving for new ones. Or if the windows in your house are getting old, start saving for a new ones. Or unexpected medical bills.
- Make room for special things – This can be taking a trip of a lifetime, finishing your basement, investing in you golf hobby and giving to charity and/or church. This type of spending is fun because you are telling your money what to do, month after month.
- Large purchases. These are things like a new set of golf clubs, living room furniture or down payment on a piece of property. When it comes time to spend, you can do it without worry or regret.
- Literally save for anything you want. – Be precise and make sure you cover everything on your list that is a need and want.
Once you starting operating your finances this way you will take away they sadness of those unexpected frustrating expenses and have fun on those special purchases that mean a lot to you.

What Are The Best Accounts For Sinking Funds?
One of the safest accounts for establishing sinking funds is CIT Bank.
Once you set up your account you can create as many additional sinking fund accounts with no additional paperwork. You can also link your account to your regular bank, so you can move back and forth between accounts.
This is a great way for you to have separate accounts for vacations, house expenses, Christmas and whatever ever else you want to earmark money towards.
How to Setup a Sinking Fund
Here are three simple steps for you to set up a sinking fund(s).
Step 1: Decide which expenses you need sinking funds for
These are those expenses that are absolutely necessary to have a sinking fund for. Start by thinking about which expenses catch you off guard and leave you stressed when they come up. Some examples are back-to-school supplies, holiday gifts, car maintenance, condo fees, annual credit card membership fees, etc.
Step 2: Determine monthly savings needed for each sinking fund
This can be challenging to do for some things like maintenance items and gifts because they vary from year to year. Others are easy to calculate like insurance payments and annual membership fees. To calculate your gift sinking fund you total what you spent on gifts last year and divide by 12 or the number of months you have to save up for this expense.
Step 3: Setup your sinking fund accounts and regular transfers
Make sure you create separate accounts for each sinking fund so you know how much money you have for each category. A company that can assist you through the entire process is Financial Gym. They have experienced financial trainers that know talking money can be tough and getting your finances set up properly is necessary for you and your family. They can also help you set up separate “buckets” for each sinking fund along with recurring transfers that align with your pay schedule.
Dave Ramsey Sinking Funds And Financial Programs
I am sure you have heard of Dave Ramsey by now but if you haven’t he is a financial guru with a talk show, books and website. Dave had financial trouble when he was young and had to file bankruptcy from which we recovered from. Based off his experiences he has devoted his life to helping others get out of debt and put proper financial methods in place. His most popular book is Total Money Makeover, which I highly recommend reading if you haven’t yet. He also has personal finance education products like the Financial Peace program.
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