How to Save for Future Expenses with a Sinking Fund
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- čas přidán 5. 09. 2024
- How to Save for Future Expenses with a Sinking Fund
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These people are truly some of the only people on the planet trying to fight poverty. Sticking up for the people that have no idea how to manage money..Mad respect.
I started listening to Dave Ramsey in early 2018.... did his steps, got out of debt, no student loans, no car payment... and was blessed with the opportunity to purchase another home. Thanks for the guidance...
😍😍
Congrats! It's always great hearing success stories!
Yeah so what. I did the same thing you did only without Dave Ramsey. I also utilize debt whenever necessary to build wealth, including using credit cards, because intelligent and responsible people understand risk, minimize risk, and get rewarded for it. You don't even need Dave Ramsey.
found watch?v=l6AocMhsh8o which i just started using for my sinking funds
@@timadams2956 dude that actually looks good. so it updates automatically, will check it out.
I think Dave needs to redo Baby Step 5 and change it from "Save for kids college funds" and call it "Set up Sinking Funds". Saving for college is a sinking fund and it is important to plan for not just college but all planned expenses so you do not go back into debt after finishing Baby Step 2.
agreed...my kid is grown, this was a useless step for me.
Saving for college is not a sinking fund. It's long term savings
I have my sinking fund for 3 things! 1 buy next car cash in 5 years. 2 replace roof in about 10 years 3 replace HVAC system in about 10 years.
I also have above and beyond my E fund for these 3 things you listed. In addition, I have enough to cover yearly maximum out-of-pocket medical expenses ($7000 spent on this, this year, you never know), and a category for "surprise" bills. I don't keep a grand total of all 5 of these categories, nor keep them all separate from each other. I keep enough to cover 3 out of 5 of these situations, figuring that all 5 won't happen at one time. If they somehow do, I still have my normal E fund, and a large brokerage account to pull from the market if I need to.
you just by CD or bond with that, so you have it and it earn a little bit of money.
@@az21bob666 Obviously you aren't familiar with Dave's advice. No cds or bonds whether individual or bond funds
i am familiar, BUT i also a man that can think for himself.
SO for the person you i was talking about, he said he saving for a saveing for a car in 5 year, instead of a saveing account he could do 3 mouth cds over and over again till it time to buy the car, instead of just haveing it a bank.
say my son birthday in 7 mouth, i have 3k saved for him, i could throw in a 6 mouth CD make a few dollars and have in a mouth before his birthday. (tell me what wrong with that)
@@az21bob666 Heres what you do my man. Call Dave's show today 1 to 4 cst @ 18888255225 and say to him about cds and bonds you did in previous comment.
I have 8 sinking funds - car repair/plates, fun money/house improvements, health insurance, taxes, life insurance, professional fees, pet care, and an HSA, etc. They mostly get funded once a year for the following year so we're always ahead. Started them 8 years ago. Best thing we did.
That's great! I've always heard that "failing to plan, is planning to fail!" And it's great seeing people take charge of their finances and succeed!
I'm glad I'm not the only one going above and beyond on multiple sinking funds. I do the same. Kids activities, home projects, pet fund, annual dues fund, vacation, gift buying fund, etc. It helps with peace of mind knowing there's always some place I can pull from when the expenses actually take place.
One thought that I struggle with is does this count as "savings" or expenses? It can be argued either way but sometimes I think I don't save enough. Thoughts?
Same, well maybe not all those but same concept. Are you military Todd?
I do the same. They are all in “savings accounts” in our bank. Whenever a expense comes up under one of those categories, I just transfer the money from those accounts into our checking. I label it as expenses in our budget though as the money is coming out of our checking account every month. Seems to work and gives peace of mind knowing the money is there if we need it or want it
@@pablorpm I guess it's "saving for expenses"
I do this, I just have one account that has $1000-2000 and anything I need outside of this week's pay comes from there. I need to manage it better, but I always have money.
One way you could do this is keep your first $1000 emergency fund and then save an extra 6 months expenses. Keep your first $1000 fund as your 'sinking fund' and make it more if you need to.
Work out your annual expenses on a weekly basis and put this amount into the fund on a weekly basis (or monthly, I.e. when you get paid).
For me it works out at $100 a week so that's how much I have to put aside and all my bills are covered. But if there's something I need to buy, it just comes out of there and I refill it later
Budget, pay yourself First, have savings goals in place
Sinking funds are great for: 1) saving for a down payment on a home; 2) saving to pay for auto insurance policy in full (6-mo); 3) saving for any non-emergency big expenses (ex: my boyfriend just got hernia surgery that we had been saving about 6 months for - it wasn't medically an *emergency* although still very necessary, and it was also a BIG chunk of change)
The first time I really experienced the value of a sinking fund was when I realized I was putting away the same amount a month I used to put toward my car loan for my next car in cash. That was a really comforting feeling.
Paying for a $3,000 water softener in cash without worrying about it was nice too.
I went crazy with these, I even have one for my car registration. $.88 per week, haha!
Hahaha nice
I do too lol but Iump it with my car insurance and maintenance.
Eh... I really like sinking funds within my budgeting app. It was a total game changer for us. I have them for expenses I reasonably expect to occur semi yearly, yearly, or occasionally. Computer, propane, hay (farm life), new phones when ours kick the bucket, medical deductibles, any subscriptions and property taxes are a few. I take the estimated yearly cost, divide by 12, and add that every month. We are on a tight budget, so this helps us be diligent in not feeling we have extra money this month to spend on fun, if next month we needed that money for something like a vet bill. Of course we structure our 3-6 month savings differently too, in that we budget a month ahead, then two, then three, etc.
My entire budget is based off of sinking funds. Every category I have in EveryDollar I make it a “fund”. They work just like the envelope system. It’s so much easier that way as the balance carries over automatically to the next month. (Also I keep an excel spreadsheet that calculates how much I need to add each month based on the previous months fund balance. (Yes I’m the nerd)). Say you budget $250 monthly for gasoline and you only spend $100. The $150 carries onto the next month in the fund. Meaning the next month you only need to add $100. Easiest way to budget and with EveryDollar.
I love sinking funds. Like they said, they're so important for the things you KNOW are coming up.
Dave!!!!! Thanks to you...a month ago I sold my 2020 car that I was leasing. I got out of my car “FLEECE!!!!!!!”🙌🏾 I purchased a car cash and now over $600 is coming back to me every month!!! Thank you so much!!! 🙏🏾..Never giving my money away for a car ever again!!!
Don't agree with Dave on this one. Sinking funds are like any other budget item. You can put it in your budget if you want to and it makes your life easier when the annual vet bill or doc sick visit comes up. Many annual, well visits are free, but unexpected sick visits they ask for payment that day. They can bill you, but if you pay it in full with a sinking fund, it's not lingering over your head.
Agree. I have sinking funds while I'm getting out of debt. What if you are only on baby step 1 and you have emergency after emergency that's more than $1000. Then what?
I agree. I thought their answer was incomplete and almost sloppy. Sinking funds are such a breath of fresh air, even if I can cash flow some things i havs SFs for I like saving ahead of time so my budget doesn't have to change too much when I actually have to pay for x item.
Thank you lord sweet jesus, this video popped up. I was thinking this same thing today at work. I'm in baby step 3. Good question, and good answers! Thank you Dave & Rachael!
I wish he addressed the Vacation/Home Improvements end of the question because these wouldn't be emergency expenses. How should we effectively budget money for Vacations/Home Improvements while having still a mortgage ?
Figure out the amount you will need (come up with a good estimate.) Decide when u want to begin the project. Divide the amount of time by the cost and put that amount aside each month in the sinking fund for the project.
Example: kitchen remodel to get done in 3 years. Cost of 10k divided by 36 months (put away 278 a month) do not spend over the amount you allot for the project
I follow the 1% rule for the home maintenance. My home is $250k so I put $2,500 per year in a fund for normal maintenance.
For vacation it’s more up to you based on your goals. My wife and I use one of our two yearly triple pay check months to put one of those extras in a vacation fund. We would rather do big vacations so we save for several years and then go international but that’s our preference
started my sink funds on February and now i'm 2 months down and $2,400 saved up! I'm truly happy I started doing this. It would help me prepare for my future expenses and for my back to school funds.
I love using sinking funds, they are a no brainer!
*awesome upload. ppl should realized they overstretch with purchases, and in bad conditions, those overstretches get exploited*
Be financially prepared for anything financial
One of my sinking funds is just incase my phone breaks so I hopefully don’t need to dip into the main emergency fund. Usually is like $5-$10 per paycheck. If that ever gets big enough to buy a new phone, then clearly I’ve had my current phone long enough that it’s old and may be worth upgrading.
I have an income replacement account, an emergency fund account and a house stuff account. 🤷🏾♂️
Saving in these times? When the dollar is falling hard?
@@aytcs yes but investing in stable assets or even cryptocurrency is by far better than traditional saving..
Gotta disagree with Dave a bit here on cashflowing those expenses. We have about 18 sinking funds for different classes of items that are predictable over the long run, but not monthly. One of those is veterinary; some other examples are auto maintenance, medical expenses, clothing, auto insurance, annual subscriptions (one fund per subscription), etc. You can get a pretty good idea of how much you need annually in these funds by looking as past years' budgets, and tune them as they either run short of cash or too much piles up in them. It's helpful because you budget the same amount monthly and when those irregularly timed expenses hit you don't need to readjust your whole budget to cashflow something in a particular month.
Get on a written budget live off rice and beans, beans and rice .
Practically my entire budget runs off sinking funds:
1) Home repair (and I have everything scheduled out for the next 20 years for roofs, driveway, windows, flooring, appliances, etc)
2) Car repair
3) New Car fund
4) Boat Repair
5) Administration (covers things like passport renewals, car plate renewals, aviation medical, etc)
6) Dental (I'm Canadian so most other healthcare is covered)
7) Gifts (for Christmas and birthdays)
8) Vacation
9) Home improvement (separate to home repair)
10) And then finally Emergency Fund
Literally the emergency is only for income replacement if I lost my job and have to float my budget for a few months!
How do you do it?
@@babydoll33012 right !!!!
@@babydoll33012 recently made a spreadsheet to help with this, automatically updates to track, say if you are putting in a total of $200 per week to go towards 7 sinking fund categories, it will track how much each category is getting. have a look on my video if you are interested.
My sinking funds are more than my emergency funds.
I don't set limitation on what I will spend , nor do I save for specific purposes/emergencies. I just don't like spending money, so money accumulates until there is a good/desirable reason to spend/invest it. I don't think this a good solution for most people but it is for the misers amongst us who like simplicity
I'm the same not even on a set budget just live well below my means so it works..able to save over 60% of income. With no big vacations likely even more this year.
How can we nominate Dave to be a guest judge on Shark tank ?
That would be cool
I never liked an ambiguous "emergency" fund, so I have my (two, coming up on three) months of reserves all in sinking funds for all my normal expenses, and an equivalent 'reserves' fund for my house payment. As soon as that's three or four months worth, I'm going to set up a Money Guy type emergency fund that's enough to cover my car and house insurance deductibles. Medical is its own sinking fund that's going to match my HSA insurance plan deductible so I can let my HSA grow.
I do have budget categories for vehicle, which covers my fuel, maintenance, insurance, etc. That has a large maximum, and I intend to use that money to upgrade cars as well, and I have it set to a normal "car payment" amount ($550 for now, but I'll probably increase it over time) so I can budget like I'm financing a car, but actually pay for them with cash. Pet I have set up with a large maximum as well, and all of my dog's food, vet visits, boarding, etc come out of that. But he's getting older, so I have it set big in case we need to spend more money at the vet in the future. I keep one "random" category for everything that isn't a regular expense, and it's also a sinking fund. Using them well can really give you a direction, especially when you're in debt payoff mode. I always kept one month of expenses in sinking funds when I was going crazy on debt payment so I was certain I had the money to pay every bill and expense, and that really accelerated my debt payoff (cut nearly two years off my plan).
I actually didn't know what they were called when I first started using them, I really only realized what they were called a few months ago.
@@aytcs My wife and I each have "discretionary" funds, with large targets. When we were in debt payoff mode and now that I'm in 'building reserves', the monthly budget for them was low, but after we get the reserves built I'm going to kick the monthly budget up. They're great for saving up for things we want just because we want them without blowing the budget :-D
I completely agree with your thoughts on the ambiguous emergency fund. The more ambiguous, the easier it is to justify spending out of it, especially during an emergency. My emergency fund is strictly for income replacement if I lose my job. All other things like car and house repairs/etc are fairly predictable on a larger scale -- for example you don't necessarily know when your car's starter is going to kick the bucket, but you know that if you have an older car, wear and tear repairs are going to start popping up, so that you can plan for. So it just makes sense to plan for those.
Fixing your car is only an emergency if you're too dumb to realize that mechanical things break down over time and have failed to plan for that!
@@chad1755 I use my 'automotive' fund for repairs, fuel, maintenance, and upgrades to newer cars :) If I manage to accumulate enough anyway. We'll see how that idea plays out longer term, lol.
@@livewire98801 Yeah that works. I've personally split mine out into a separate "new car fund", "gas", "repairs", "insurance". That's probably taking it a bit far for some people but it helps me keep tabs on how much each of those things cost me. And it specifically ensures that I have enough dedicated money tucked away for a new car when the time comes.
Use Ally bank and you can open as many savings accounts as you like. It’s easy to keep up with your sinking funds because you can name each account to “car purchase”, “vacation”, etc.
Thank you for giving me this idea
Instead of opening up separate savings accounts, with Ally you can haves up to 10 “buckets” for each account that can be for any purpose you want.
@@0neofthem yes, Ally started doing this and that is what I do as well.
have a look at my spreadsheet i made on my channel to track my own sinking funds, auto updates to track upto 7 sinking fund categories within the single bank account
Interesting term... I did the same thing but called it my envelope savings accounts. A different envelope of cash for each planned expense. Real estate taxes were horrible, $600 per month, that envelope was bulging. But I knew if it was in the bank it would get spent.
Sinking funds can lead you down a rabbit hole of what if’s if you are not careful. I prefer a future expense fund.
Well I was thinking there should always be a car maintenance fund that should always have a cushion enough for like a car deductible or repair so it shouldn’t have to come out of emergency funds I always thought like the emergency funds would be for like things is less likely to happen like water heater repair or replacement or a washer or dryer repair or replacement after warranty you know stuff like that or bills expenses if recovery from work needed
There is accounts with banks where you can separate the funds Ally bank ,capital one etc. take what works for you and leave the rest.
Well I was thinking there should always be a car maintenance fund that should always have a cushion enough for like a car deductible or repair so it shouldn’t have to come out of emergency funds I always thought like the emergency funds would be for like things is less likely to happen like water heater repair or replacement or a washer or dryer repair or replacement you know stuff like that really just all your home bill expenses if recovery from work needed due to injury or sick.
search for the vid ' self updating money tracker' it is the one by coolmonkey spreadsheets, been awesome for tracking my sinking funds
omg this has been my question for the last 5 months
My next big expense after the emergency fund will either be gutters for the house (it doesn't have them yet) or to replace my car whenever it dies (Hopefully that's a long ways off).
I guess you could call it a Home & Car fund.
Where are you setting up these funds? My bank charges me yo open another account
It looks like Dave's not a big fan of sinking funds. This is the first time I've really heard him talk about sinking funds and he pretty much denied the need for one. His approach is a stop baby step four or five and six and dip into the emergency fund if you have large expenses. That's frustrating though. It's better to have sinking funds ahead of time that way you never have to touch the emergency fund. Not everything can be put into the budget, like car repairs, home repairs.
I think its because the term is misunderstood. People set up funds for every single expense and call them sinking funds.
This is a perfect video. I have been wondering how to save up for hospital and other medical expenses that will be coming up for us in the next few months.
hi darby, i recently made a spreadsheet to track my own sinking funds, you may like it, have a look on my channel and let me know what you think!
I’m still not sure how they work and how you keep track of a sinking fund.
Wow this fund is just bad. They need to fix a lot and get back on track!!
Christmas is a great reason to hold a sinking fund.
I pay an amount to debt, sinking funds and emergency fund at the same time. Im terrified to just have $1000 and all the rest to debt.
Watch one of daves video on doing more than one baby step at a time
Pay off your debts first and then start saving
More about this please!
Amazing! Never thought I'd be finish watching this video!
What about insurance claims vs paying cash for the repair. I need to replace my car door. Wondering if I should claim it on my insurance for 500 deductible vs paying cash (which I have)- just a lot of money.
Not sure I agree with Dave regarding vet bills. Pretty much every time I've had to take my pets to the vet lately, I didn't get out of there with a bill less than $750. Most monthly budgets cannot take a hit like that. I have a sinking fund called "house, car, pet" fund. I'm working to get $5,000 to $6,000 on that fund, totally separate from my emergency fund, because every bill for pets, car, and my house hasn't been under $750.00.
Basically, don't get crazy and make an emergency fund for your emergency fund. It is okay to spend your emergency fund on emergencies.
Should you start sinking fund if you have debt? Or should you focus on paying the debt first then start a sinking fund?
Debt first then sinking fund
Rich people don’t need to have sinking funds, poorest people cannot afford it. I’m in lower mid class and I enjoy my several sinking funds: for dogs, car, travel, miscellaneous and gifts, so I don’t have to take out of my real emergency fund.
A great lesson to learn . Thanks
This is my struggle right here....
Well Vet bills and car repairs are literally emergencies that emergency funds should be for
We have the technology to be able to set up as many Sinking Funds as needed. Nothing wrong with creating as man as you want. I have 8. And they all come in handy. If say my Dog has an expensive bill that costs 3k and in that fund I have 2k at the moment, I can just easily grab the extra 1k from my emergency fund. Then monthly start to rebuild that fund as well as rebuild the emergency fund again at the same time. And say my dog has another medical bill the next month if I am unlucky, I can just use the emergency fund for that bill again.
Sounds good... I have a passive income stream for my pets.
I'm pregnant and trying to save for the baby. I want to make sure I can get ready for her when she's here. I'd like to save a set amount up until I give birth.
Mrs. Cruse is a project of successful announcer.
This is good, info. You know if I every meet this man in person dinner is on me.
Just curious, for people who have different sinking funds, do you include the different funds in the same savings account or do you literally have a separate bank account? Thanks.
Hi, I have recently made a spreadsheet so you only need the one bank account, some banks charge fees per account so not good, the spreadsheet automatically updates so you could set it to track a regular payment, eg if I put $300 into my sinking fund account every week and of that amount, $200 goes towards house deposit and $100 to vet bills etc,, the spreadsheet will track that, i can have a ability to track (from memory) upto 7 or 8 sinking fund categories within the one bank account.. have a look at my channel for the vid if you are interested.
@@coolmonkeyspreadsheets3101 Thanks for responding; I'll go check it out!
@@aytcs Makes sense. Thanks for your response.
I leave In the checking account and track with the EveryDollar app. Only emergency and PTO account are true savings accounts.
@@jackdetweiler3442 Ah, that system makes sense. I appreciate your input.
Emergencies are what they are. Start investing.
Investing is the new orange
Why aren't these guys ever say the truth about the dollar.. ?? It's losing value for decades..
Its you're saving longterm your funds will be useless in the next half decade..
Get into crypto before it's too late, tell your friends..
That's very true, I'm into crypto... the big banks hate it and organise scams to injure the crypto industry 😂😂
So they can keep stealing your money..
Go crypto... 🤪 the sooner you start the better..
@@alfredajavad6068 any tips? I have been investing in cryptocurrency for 3 years..
My name is Ramsey
Thank your parents for giving you a stupid name.
My 20 year emergency fund I never use yet. Have savings and investments including over $4k in credit card cash points as quick access emergency fund on standby.
Zero debt.
Good enough.
@@sunnydays4966
It is a credit card. The cash points just sits there and grows so instead of spend it I just let it sit there for emergencies.
@UCvOsueO6K1HnoFoDKhPKMZg
Its My AmexBlue. Years of weekly groceries and gas,Amazon,annual property tax and home/auto insurance,home remodeling and maintenance projects,travel,etc...
Never had debt on my cards by weekly autopay and prepay for large purchases.
Just a tool to move and spend cash.
Co presenter keeps talking over Ramsey..... annoying
Lol his daughter. I don’t think he minds
@@davidbown2707 TBF I have a daughter and it would actually make me mind more, as she should know better than someone I hadn't raised.
If your transmission goes out, get another car, not worth the repairs
Hopefully u have the money to get another vehicle
Totally depends on the car, your skill set, a 2nd opinion, availability of re-built ones, etc. If your car is worth $1k and it goes, likely just junk it. It’s tougher the more it’s worth. I had a weird case where my car at the time was worth about $5-6k and they wanted about $4,900 to replace the transmission. Got a 2nd opinion, same deal. Got a THIRD opinion from a super small 1 man shop... $30 solenoid and $200 labor and the car drove for another 5 years...
Start bicycling
@@sami-9233 Yeah because that works everywhere, right?
Depends on car if in otherwise good shape can get a used one with low miles and have it swapped out for under $2000.
46th