The 5 Sinking Funds I'm Focusing On In 2020
By literally broke
Sinking funds are to personal finance what foreplay is to sex: something every college male, and also and every saver, thinks they’re too good to need.
So, what is a sinking fund? And what is foreplay? Just kidding. But really... A sinking fund is a savings account (or cash envelope) set aside for a specific purpose.
If you’re planning to purchase a new computer in a year, for example, you set up a sinking fund (an envelope or account earmarked for this purchase) and then contribute to it weekly, bi-weekly, or monthly. Then, you might divide $1,200 by 12 and realize you’ll need to save $100 a month to meet your goals.
So, without further ado, here my 5 sinking funds that excite me almost as much as Mark Ruffalo does:
Sinking Fund #1: Botox
If you love facials, spa days, etc. sinking funds are a good method to save up to treat yourself without going overboard!
Growing up I was super insecure about my teeth. Whenever I smiled more of my gums showed than my actual teeth.
It was just WAY too much emotional effort to be insecure about my smile all the time, so I decided to try botox in the fall of 2019. Although my boyfriend and friends were initially skeptical they quickly opened up to the idea once I showed them before-and-afters.
Anyway, I love my smile now! The procedure is super quick and only requires a round of injections above my lip every three months.
Since it is one of the larger purchases I make in a year, however, I set aside $20 every week for my doctor’s visit.
Sinking Fund #2: Traveling to Hawaii
My boyfriend and I are each saving for a Hawaiian vacation in April 2020. We both travel hacked Hawaiian Airlines credit cards so that our actual flights will be free!
My sinking fund goal is $1,500 for food, travel, lodging, and fun. Using Qapital (which I use for all my sinking funds, btw) I created an automatic rule that puts 5% of every paycheck into my Hawaii fund. As the date approaches I may increase this percentage, but as of right now I have roughly $600 saved.
Sinking Fund #3: Clothing
When I was paying off my credit card I didn’t budget for clothing at all. So now I need new bras stat!
I automated my clothing fund so that every week $20 is deposited into it. To be completely honest, I may end up increasing this to $25 a week just so that when it does come time to shop I have more than $100 earmarked for the purchase.
Sinking Fund #4: Rolling Over My Old 401k
Now to a more financial financial goal! I’m currently saving to rollover my old Vanguard 401k into an IRA and then into a Roth IRA (it’s legal, I swear).
When I worked at ClassPass I stupidly only contributed $100 to my 401k but now to roll it over I need an additional $1,000 to actually keep that original $100. Insane!
I set up the 52-week rule on Qapital so that by the end of 2020 I’ll be able to meet the $1,000 minimum stress-free. If you’re unfamiliar with the 52-week-challenge you can read more here!
Sinking Fund #5: Saving Up For Bridesmaid Costs
I’m a bridesmaid in a friend’s wedding and am saving $1,000 for my dress, hair, makeup, gift, etc. Both the bachelorette party and wedding are in New York, so I won’t be traveling, which is why my savings goal is lower than the national average.
Later this year I may increase my savings goal to $1,300 just to be safe. Whatever, I’ll reevaluate this summer once more details are nailed down. Either way, I feel more prepared with my sinking fund since I know weddings can be a huge budget buster!
The benefit of sinking funds is that they make large purchases less stressful. They warm you up for the grand finale--a purchase!
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