GLOSSARY · BUDGETING, SPENDING & SAVING

Sinking fund

Money set aside in regular amounts for a cost you know is coming but that does not arrive every month, such as an annual insurance premium, car repairs or holiday gifts. It turns an irregular bill into a planned monthly one. A sinking fund is separate from an emergency fund, which is for costs you cannot predict.

Also called: sinking funds, irregular expense fund, savings bucket, annual expense fund, planned expense fund

FORMULA

Monthly amount = expected yearly irregular costs ÷ 12

COMPUTE IT WITH YOUR NUMBERS

Down payment savings timeline →How long to save a down payment plus closing costs?Emergency fund calculator →How many months of expenses do I have saved, and how many do I need?Subscription cost audit →How much am I really paying for subscriptions per year?

LEARN IT PROPERLY

CHAPTER · BUDGETING METHODS & FUNDAMENTALS · FOUNDATIONSEnvelope Budgeting With Cash or Apps CHAPTER · BUDGETING METHODS & FUNDAMENTALS · FOUNDATIONSZero-Based Budgeting: A Job for Every Dollar

SOURCES

Your Money, Your Goals: A financial empowerment toolkit. Consumer Financial Protection Bureau.
Mental Accounting Matters. Thaler, Journal of Behavioral Decision Making, 1999.
Your Money, Your Goals toolkit. Consumer Financial Protection Bureau.

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