Sinking Funds: The Secret to a Successful Budget

Hello all! Andy Hill here …  We have a new guest post from personal finance writer Amy Beardsley from Early Morning Money. Amy is a self-described money geek that is obsessed with simplifying money and breaking free from the burden of debt. Her article below shares why we all need sinking funds in our budgets to help us create that freedom we desire. Enjoy!

When it comes to your family’s finances, you already know you need an emergency fund to protect you from a job layoff or major medical illness. But what about all of those little expenses that come up year after year, like car insurance, Christmas, or your annual family vacation?

That’s what sinking funds are for, and they’re the secret to a successful budget.

When money is tight, or you’re working on a big debt-payoff goal, covering all of your expenses is key to making it work. With sinking funds, you can easily stick to your budget even when faced with costs that don’t come up that often. Here’s how to get started.

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Avoid Holiday Debt Next Year With a Sinking Fund

Christmas is a time for fun, family and giving. Unfortunately for some, the spending associated with this joyous time of year was bought on credit.

According to Magnify Money, this past season Americans with holiday debt added $986 in debt on average and the pay off may not be until the next Christmas! The author of the article Nick Clements writes, “55% plan to take more than 5 months (to pay off the debt) or just make the minimum payments, which could extend the debt to 10 years or more.”

If we’re still paying off debt from last year’s Christmas, how can we enjoy this year’s Christmas?!

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