Debt Free Journey, Finance, Money, Savings

How Sinking Funds Changed Our Lives

Maybe sinking funds didn't exactly change my life, but they definitely changed our budget! Sinking funds are like little pieces of sunshine available to you when the weather turns bad. Think of it like rainy day funds, but with very specific purposes.

If you were to ask a question in THE Ramsey Baby Steps Community Facebook group, you would get a plethora of answers to what various sinking funds people have. I remember seeing one person post their sinking funds, and they had over 20! Here are mine:

  • Car
  • Mark
  • Life Insurance
  • Other
How Sinking Funds Changed Our Lives


This one was a no-brainer for Dustin and I to have. It never ceases to fail. I get that Texas Department of Motor Vehicles envelope in the mail in June and think what can I not pay to be able to pay this registration, and get my car inspected? In our car sinking fund, we have budgeted for the following items: car inspection, car registration, oil changes, tires, AAA membership and miscellaneous. We put $80 per pay period in this sinking fund (we get paid twice a month).

So far this sinking fund has been a lifesaver for us. When we had to take our Chevy in to get the tires checked, we were expecting to need two tires. Turned out we needed four new tires. Panic was about to set in when the guy told me that. But, then I remembered that we have a sinking fund for our car - this was our first time using this sinking fund. Then just a couple months ago my car wouldn't start. We called AAA, they got to our house within 20 minutes, and BAM, new battery. All it took was a quick transfer from savings to checking to be able to pay for that new battery.

It was such an amazing feeling not needing to figure out where the money was going to come from. We figure after one year of doing $80/pay period, we are going to reevaluate if that truly is a good amount. We also realize that at some point we will need to add to the car sinking fund money to buy a new car. The next car we buy, we are paying cash for, and we are going to start saving in enough time to do so. Our Chevy is at about 132,000 miles. We figure we will begin saving a much higher amount for a new (to us) car when the Chevy hits about 170,000.


This is more of a miscellaneous for Mark. We put $40 per pay period of $960/year in this fund. So far we have used Mark's sinking fund for new school uniforms, pull-ups, shoes and a few summer toys/activities. It's nice to have the money available when I see something that he needs. For instance, I found 4 pairs of shorts that fit his schools uniform policy and a pair of tennis shoes that he will be able to put on himself, for $25. I made the purchase and then transferred the money from savings to checking.

Life Insurance

Per the suggestion of Dave Ramsey, Dustin and I both have a term life insurance policy. Our policies combined equal about $1,400/year. Divide that by 24 pay periods, and you get about $59 per pay period. My policy renews in May and Dustin's in July. This year's policy is paid in full, so the $59/pay period we are transferring every pay day to savings will go towards next years policy. So when May rolls around, all I have to do is transfer money from savings to checking to pay for the next year.


I have to be honest. This one is all over the place. We do not have a set amount that we are transferring to this sinking fund, but we try to put some in every pay period. So far we have used this one for hair cuts, cleaning supplies and our 5 year anniversary dinner. We plan to hone this one in a bit as we delve into sinking funds a bit more, but for now it has worked just fine for us.

Now that I've given you an inside look into our four sinking funds we have, I wanted to give you an idea of some other sinking funds that people have.

  • Christmas - This is the same day, every year. It doesn't sneak up on you. Start saving now!
  • Birthday and Gift Funds
  • House Maintenance (i.e. pool, fence, roof, etc.)
  • Vet/Animal
  • Property Taxes
  • HOA Fees
  • Medical Expenses (i.e. copays, deductibles, braces, etc.)

Now, the next question I get when I discuss sinking funds with family or friends is this - "how do you keep track of these sinking funds?"

I've seen some people in the DR (Dave Ramsey) FB group say that their bank allows them to have many bank accounts with no fees, so they just open up an account for every sinking fund. To be honest, I tried that and immediately hated it. It was too much tracking. I didn't like having all the bank accounts. It was too overwhelming for me. I also created a spreadsheet in my budget excel doc, and also hated that.

After multiple trial and errors, I found that one bank account and good ole fashioned (erasable) pen and paper works for me.

  • This dollar and cent memo book from Staples is what I use to track my sinking funds, budget and progress. I live by this notebook!
  • Next up are my erasable frixion pens. They sell these pens at Staples, Target, online and many other places. I buy them at this local Japanese bookstore in an Asian grocery store. There I can buy one at a time, which is all I need.
  • Lastly, these filing tabs are the perfect dividers in my notebook.

I am pretty darn proud of the fact that we have stuck to that transfer from checking to savings every pay day to add to our sinking funds. We haven't dipped into them unnecessarily, which is a HUGE win! If you have sinking funds outside of the ones I listed, I would love to hear about them! Or, if you have any questions since this is your first time hearing the words "sinking funds," also let me know!

sinking funds notebook
sinking funds life insurance tracking