s/o Sinking Funds

[Soror]

S/o the budget accounts I am wondering what others use for sinking funds. Currently, we just have a savings account that we send money to for various upcoming expenses. I'd like a way to divide it up more, rather than just mentally dividing it, but don't want a whole bunch of accounts. How do you do sinking funds?

[KatieJ]

I am quite sure there better ways to do this,  it this is what I do.

Using Quicken,  I figure out what  I need to save for taxes, insurance, etc. I divide that up by paychecks and do a hold for taxes, insurance, etc. The money looks like it is spent, but it in my account. It is tedious to go back and delete those holds when I need the money,and if I knew more about Quicken, I could do this differently I am sure,  but it works for me. 

[Arcadia]

How many sinking funds do you need to divide too?

Savings account (few transactions) - sinking fund for in-laws “request” for cash, replacing defective household appliances, home and car insurance 

CDs - emergency fund for unemployment 

savings account (fluid) - upcoming expenses 

tax withholding is already done every paycheck so we don’t have a sinking fund for that.

I have 7 accounts though; a mix of savings, current, and CDs.

[Sherry in OH]

We track using Excel spreadsheets.  Dh doesn't like to keep a lot of excess money in checking, so some funds are immediately transferred to savings.  They are transferred back to checking when needed.

Some banks allow you to set up sub-accounts to earmark funds for specific purposes.  See SmartyPig for an example.

[ktgrok]

I use YNAB and it has categories for such things. Mine include home maintenance, auto maintenance, gifts, christmas, and then I have categories for annual expenses like HOA and Amazon Prime, etc that I can fund a little each month. YNAB will help you set up goals to either do a certain amount each month, or fund a certain amount in a certain amount of time, etc. 

[OH_Homeschooler]

The online bank Ally has savings accounts with buckets so you can divide your money into the different buckets within the account. The savings account APY is TONS higher than my actual bank.

https://www.ally.com/do-it-right/banking/what-are-ally-banks-savings-buckets-and-boosters/

 

Edited February 19, 2020 by OH_Homeschooler

[Carol in Cal.]

How I did it was:

I use two savings accounts and one checking account at the same credit union.  I don't pay anything to do this.

The checking account is for regular expenses that are paid monthly--mortgage, credit cards, utilities, cash, charitable donations.

One savings account is for the sinking fund.  It gets automatic deposits with DH's paycheck.  Each is a proportion of my estimate of our annual recurring but not monthly expenses.  I recalculate this every couple of years--property taxes, non-monthly insurance, car repair estimates (we drive old cars so this is always a thing), gifts.  The total is divided by the number of paychecks in a year, and that's how much goes in.

Then the other savings account is for the emergency fund, never ever touched for any of the above, and for any surplus that might develop.

So every time a big bill comes in, I can call the credit union and tell them to move funds from the sinking fund to the checking account.  BUT, if I have a surplus in the checking account to partially cover that bill, I use it and only transfer the amount that I actually need to cover the bill.  That way the theory is that extra money would add up in the sinking fund, and be moved into investments or something else.  In practice the surplus tended to be used for non-anticipated stuff, but it was really good to have on hand.  Functionally it buffered the emergency fund.

Now that we are older with no kids at home and some career changes we are using a different system that is much harder to describe.  Among other things, since we are both over 59 1/2 we can park our emergency fund into an older savings contract that pays no less than 3% (not available anymore but we already had these) but has a penalty for withdrawals before retirement age.  Also a sinking fund can go into something like that, but (it's complicated) DH is between jobs so we are not using the sinking fund approach at the moment.  For me, sinking funds are very functional mostly when income is steady.  I don't see a great value to them when income is coming in spurts.  YMMV, I know you can make this work but for me it doesn't make sense.  So we are not using the approach above ATM but I fully expect to return to it when DH starts his next job.

[Ottakee]

I have a credit union account with a regular savings, a Max checking (3% interest up to $15,000), a money market (limit of 6 withdrawals a month) and the. Likely 8-10 other savings accounts.  I can move money from one to another online in an instant.

I have one account fit gifts, clothing, vacations, etc.  Then there is an account for car repairs, tags, etc.  Another account for property and any other taxes.  Then I have a sub account for each kids that I keep some money in to spend on them.  I have an account for major home repairs....furnace, AC, roof, etc.  Then I have 3 different CDs that are paying decent interest.

I keep my emergency fund money in that MAX checking as I can access it instantly but also earn good interest in it.  My monthly, general spending money goes in there too....but I mentally know that x amount is the emergency fund and never touch that portion.

It sounds more complicated than it is.  I also have it set up to auto transfer from the max checking each month certain amounts to each sub find/account.

[kbutton]

7 hours ago, HeighHo said:

Your bank may let you establish other accounts and link them all together, without an additional service fee. 

Ours does this, so we have multiple accounts.

Debit card account--this sort of functions like a cash envelope for groceries and gas. If I need to be that picky though, I would need to tweak it a little. It's not a shared card, and it's there because sometimes I don't get to the bank for cash and/or I can use it at the gas pump.

Checking account--all bills get paid from this account.

Mortgage--the mortgage comes directly from here each month (same bank), and we pad the amount we have DD into this account for general repairs and maintenance. If we have a need and have accumulated some funds, we'll use it on pricier but not super expensive things (like facelift for a bathroom, but not a bathroom remodel or a new roof). It's great for unexpected plumbing bills and things like that (as someone said up thread, buffer for the emergency fund).

Big but anticipated expenses--car insurance and tags, vacation, Christmas, life and disability insurance premiums, bulk beef from the farm, clothes--anything that I found was outside a predictable monthly bill. Some people pay insurance differently, but it is saves us a substantial amount of money to pay all our premiums for the whole year, and they all come due very close together. Most of this fund is saved in the first half of the year and spent in the second half because of timing we can't help. 

Long-term savings--big stuff comes out of here like new cars, new roofs, remodels, etc. It's a huge buffer for the emergency fund.

Emergency fund--in an interest bearing but easily accessible account recommended by our financial advisor. 

We need an unusually large emergency fund because if my husband has to change jobs, besides the time it takes to get a new job, it can take 6 weeks to a couple of months to get through credentialing at a new facility (total pain). We have to plan that a job change that is not voluntary is going to be at least three months in the making, and he may or may not get severance. 

We are both frugal, but not as much as we used to be or could be if we had to.

[I'm a little afraid to say this, but we don't actually budget. We used to hair split, and we found that we saved more just using this big funds than trying to allocate and save receipts, etc. If they aren't working  (i.e. money isn't building up for expenses correctly, or the savings account is not building after the other accounts do their jobs), then we pull out credit card statements, look at monthly bills, assess what's changed, and then fix it with frugality in some area.] 

[Tap]

I have one checking account and then various savings accounts attached to it.  I use the titles to keep things straight.  So the title may be "tuition $10,000, fees $1500, clothes/supplies $2000". Once that savings reached $13,500 I knew it was funded. Sometimes I would continue to let money go to that account anyways (building the next years balance) or I would stop the contributions for a while and put extra somewhere else.  For things like holiday shopping or tuition, it wasn't hard to mentally keep track of, what needed to be funded and when I needed to access it.  I don't like keeping track of making monthly payments, so I pay all my bills that I can upfront like tuition, but things that were a bit more variable (ie daycare) I paid in 3 month increments or set up as bill pay out of the respective savings account. I have certain amounts moved each week out of my checking account and into each savings, so I don't even have to mess with much month to month.