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  • Writer's pictureCynthia Anderson

Think Ahead Budget

Updated: Jun 7, 2019

Days at the beach are almost over!

As you are creating your budget every month, consider what events are coming up and start stowing away some cash into what we call sinking funds. With a sinking fund, you save a small amount each month for a certain amount of time before you make your purchase. You can keep these funds in a savings account. Capital One 360 offers sinking funds on their accounts. Sinking funds are a great tool to create buckets of money for upcoming costs. My clients are currently stowing away money for car repairs and winter wardrobes. What are your upcoming needs?

Car Repairs

My brother, Jim, is a mechanic; he owns JNJ Auto in Phoenix, AZ. Jim’s average invoice on car repairs is about $1200. What does this tell you? It tells me that you need about that amount in savings to cover any repairs.

Even better - start a car replacement fund. Often times when there is no car payment, people direct those funds to others wants. After not having a car payment for years and the car dies, they will go back into the rut of a car payment. To avoid this, have at least the car repair cash in savings and better yet, direct some funds each month into a car repair/replacement fund. What will a car replacement fund cost you? According to Kelley Blue Book, the average new car cost in 2017 was about $36,000. You have two options - start saving for the car now or wait and take a car payment. If you save $600 a month for the next 5 years, you will have the $36,000. If you wait and take the car payment for 5 years at 5% interest, your payment will be $686.16 for a total cost of $41,169.48 (Click here for calculator) The total cost to you is $4,809.48 in interest. Isn’t it a better choice to save up for this purchase? If someone knocked on your door today and asked for a gift of $5000, would you say yes?

Winter Clothes Fund

Depending on where you live, when the seasons begin to change you will need to purchase or dig out some long pants, long sleeved shirts, and maybe even long underwear. If you don’t have a winter clothes line, add it now. Identify the total cost you are willing to pay for your winter wardrobe. For example, I am planning on spending $400 on clothing for myself by November (remember, I live in AZ). I have three months to save for this expense. I add $125 a month to this sinking fund so that when it comes time to spend I have it and I don’t have to feel stressed or concerned about spending the money.

Christmas Fund

Make sure to start that today. The average American spends about $950 on Christmas. You have 5 months left to save. Can you find $190 in your budget for the next 5 months?


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