Sinking funds is definitely how we are getting ourselves out of debt. We put a good chunk of money into our sinking funds every month. On average, we allocate about $2300 per month into our sinking funds. Our categories are: household, car repair, kids, beauty, school, clothing, health, home repair and furniture, appliances, car insurance, new car, and Christmas.

To look at some of these funds, it’s easy to say if we didn’t have them we could get out of debt sooner, but the reality for us is, not having these funds was keeping us in debt. Even though we weren’t planning for these categories, we were spending money on them (for the most part). During the COVID lockdown, both our dishwasher and microwave went out. Both those purchases went on our credit card because we needed them but didn’t plan for them. Now, we are setting money aside each month for appliance replacement, so the next time an appliance goes out, we will have at least some money to put towards it without depleting our entire emergency fund or putting it all on the credit card. Cars break down and need general maintenance. By not setting money aside for it, we were constantly having to put tires and oil changes on our credit card.  There are some categories on our sinking funds list that could be eliminated while we pay off debt, like beauty or clothes, but the reality is we spend money in those categories so it’s better to have the money set aside than to charge it and then feel guilty for weeks afterwards.

Our car insurance is paid in full yearly. We have a separate bank account that we have set up for automated savings. It funds our car insurance and registration each year as well as our giving and donations.  Our car insurance is due in July and is around $3300 per year.

Adequately funding our sinking funds has been lifechanging for us on the debt-payoff front. Since we started really using sinking funds, our debt has actually decreased by about 55%. We have paid off over $13,000 in credit card debt alone and built a small emergency fund. I won’t lie and say it isn’t tempting to send all “extra” monies to our credit card every month, but I know that will backfire on us because then we will spend money we didn’t budget for and be right back where we started.

Funding our sinking funds has been very empowering. Ironically, sometimes I feel like we spend less money because I like seeing our sinking fund balances grow. Admittedly, some of these funds are mini-savings accounts. It’s not every day you need new sofas or appliances, but it will happen, and it will cost money. Sinking funds are the key!

I am so excited to get out of debt. Knowing that we are already fully funding most of our sinking funds makes me so excited for the future. That means most of the money we send to our credit card right now, can become savings when our debt is paid off. (We will increase the amount we are saving for a car and our home repair sinking funds, but other than that the rest of the money can go towards savings and some longer-term goals.)  

Full disclosure, some of our sinking fund categories are new so the balances aren’t where we want them to be yet, but we are funding them! Current sinking fund balances as of 10/31/23:

Household: $285

Car repair: $500

Kids: $100

Beauty: $315

School: $100

Clothing: $295

Health: $160

Home repair and furniture: $475

Appliances: $350

Car Insurance: $336

New car: $3075

Christmas: $100

 Total: $6091

We also fund our food and gas envelopes bi-weekly but don’t count them as sinking funds. Some of our sinking funds are lower than we would like because we recently made large purchases. We paid for half our son’s welder and purchased him a new welding helmet for his birthday. That was paid for out of our school and kids envelopes.  Car repair is another envelope where we feel like we just can’t get ahead, but we are going to keep plugging away!

I like seeing our sinking fund numbers in black and white! It really is motivating to know we have a small cushion against emergencies and that we have given ourselves permission to spend some money. We are taking control of our finances, and this is another step in the right direction!