The magic of sinking funds
It doesn’t stop to amaze me to see all the growth I have accomplished when I decided to start naming my savings accounts. Never underestimate the power of clarity. And I am not talking about having all already figured out, God knows I am far from it. But once you just start putting one foot in front of the other, things start turning around and you start seeing progress that will keep you motivated. See? A domino effect.
This is where specific goals come really handy. Once you know what you want or where you want to get to, it is time to put a price tag on it and start working towards crushing that goal. At first, I started small. Before 2020…we used to love to concerts. Did anybody say Shakira? What? Bruno Mars? We are there! Everybody knows ticket concerts are not cheap and they are NOT supposed to be on a credit card paying ridiculous interest rates. So, what I learned to do was to be ready. That’s right. Carlos Vives is having a concert? I better be ready, and I created a savings account to exclusively save for concert tickets.
To start this process, I added a line in my good spending plan to save for concerts and now we go to concerts and don’t feel guilty because we sang along with Juanes, he is gone, and we still owe the concert tickets. There are also sinking funds that are not as fun but necessary. For example, we save the first 4 months of the year to pay our CPA…I know, not fun but necessary. There are many examples and there is not right or wrong. You can create one for anything you wish: Trip to Aruba, to replace the sofa, Christmas gifts, to buy the Peloton, etc.
These funds are really helpful. I see them as those mini file cabinets or drawers with tags. Every time I need to pay for something, I “open one up” to get what it is needed.
Now, there are many institutions where you can open a savings account and divide it in different sub-accounts. The best part, you can name them! You can see what is exactly that you are saving for so money does not come out of it if it is not for the primary purpose and you will feel a high rush, and can do a happy dance, when you send funds to that specific account. I of course do my happy dance and in addition, I have a chart I can color to track my progress. I know, a bit nerdy and loving it!
Curious, what would you have a sinking fund for?
