Sinking Funds- How to save for large expenses

When sticking to a budget (If you need help writing a budget, you can find that here ) my biggest priority after paying for my fixed expenses, is to contribute to my Sinking Funds (SFs). This is because SFs stop me from acquiring more debt.

In this blog post, I’m going to talk all abut SFs, what they are and how I use them.

What are Sinking Funds?

Essentially, all of the things that you expect will happen at some point, are covered with small amounts of money that you put away into an account every month.

I like to think of Sinking Funds as lifeboats on a sinking ship. All is going well, you are sailing along quite happily on your debt free journey, your budget is running smoothly, you are paying off your debts using your Debt Snowball (or Avalanche), when BAM! All of a sudden, you hit an Iceberg. That Iceberg may be a broken down car, or School Uniform costs, or whatever the case may be.

What Sinking Funds do is take away that panic of hitting the iceberg. So you aren’t left panicking about how you are going to cover that expense. In reality we know these things WILL happen at some point. Its unheard of for you to buy a car and NEVER spend a single penny on it and then sell it 10 years later. All cars need money spent on them, whether its expected or unexpected. The same goes for lots different categories.

Some examples are:

Christmas- It’s on the 25th December every year, plan for it!

Birthdays-Similar to Christmas, birthdays are

School Uniform Costs

Car Maintenance/M.O.T

Pet Expenses

Home Repairs

Clothing.

 

How to start Sinking Funds

The general rule of thumb is to work out what Sinking Funds you need, then work out how much you’ll need for each fund, divide by 12 and save that amount every month.

So, if you’ll need £250 a year for car repairs, you’ll divide that by 12 (approx.£20.80) and save that amount every month throughout the year.

Where that may not work is when you’ve only just started SFs and you have a shorter time to save for expenses. For example, it’s September and you haven’t any SF for Christmas, or is August and you haven’t any SF for School Uniform costs.

In that scenario, I would work out the BARE MINIMUM you can get away with spending for that item, and save for that first. It may mean having to scale back significantly on Christmas for example. In 2017, I only spent £250 on Christmas in total. I never thought that was possible, but I managed it. And I’m sure you could manage on an equally low budget, if push came to shove.

 

At What stage to I set up Sinking Funds?

If you are following Dave Ramsey’s Baby Steps (as I do) then you will start SFs once you are in Baby Step 2 (paying off your debt).

This is not something that you ever stop doing either, it will continue to serve you for the rest of your life.

Where do you keep your Sinking Funds?

 

It’s really up to you. I keep mine in a separate bank account, and transfer the money to them every month. I don’t have them in a high interest account, I just have them in a cash ISA that I can withdraw from quickly when I need to.

I know of some people who keep their Sinking Funds in cash in their house. If you are going to do this, I highly recommend checking with your house/contents insurance to see how much would be covered by them in the event of an emergency (fire, robbery etc).

 

I hope that helps!

Claire.

 

 

 

 

 

 

How I meal Plan.

One of the main things I’ve always struggled with, even while working towards getting out of debt, is keeping the food budget in check.
I have 2 teenage boys, and as anyone with teenagers will tell you, they are expensive to feed!

I could (and often did) easily spend £500+ a month on food. But when trying to become debt free I knew I had to tackle this, as it was my biggest expense every month and I hated seeing so much money being spent on it, while food was also being wasted.

So I did what I suspect anyone does in this situation, I had a look on YouTube and watched what everyone else was doing. But to be honest, I didn’t find many meal planners that I could relate to, and definitely none who had dietary issues ( my older son has smell and texture issues with food).

So I needed to come up with a way that worked for me and my family. I developed these really simple steps, and I hope they help you too.

1. Work out how much you want to spend

The first thing I did was work out what was a acceptable monthly food budget for the 3 of us, taking into account how much I wanted to put towards debt, how much my monthly expenses were, and how much food we normally wasted.
I settled on spending £100 per person, per month. So £300 a month. Over time I’ve managed to get this lower, but just concentrate on spending £20 less than you were each month.
This may be more or less than what other people are spending for their families, but as long as it’s less than what YOU have been spending, that’s all you need to think about. There will always be people spending less than you, but comparisons don’t help anyone.

2. Do an inventory.

To avoid food waste, I always try and start by using up what is already in the cupboards, pantry, fridge and freezer before. Not only does this avoid food waste but it saves you money too. I go through the kitchen and write down every bit of food that I have.

3. Write a list of as many meals as you can think of

The next thing I did was to write down on paper as many meals as I could think of that I knew everyone in the family liked. I was aiming for 20, but ended up with 30. When doing this, you want to refer to the Inventory you did, starting with meals you can make from what you have on this list.
This may be something that you need to leave and come back to throughout the day, as I found it quite hard to think of 20 meals just off the top of my head.

4. Look at your schedule for the month/week.

When meal planning, it’s essential to take into account what you are going to be doing for the month/week. On the nights when you are working late, you don’t want to have planned a meal that takes 45 minutes to cook. So what I do is make the quickest meals ( or eat leftovers) on the nights when I don’t get home until late, and make the meals than need  more time and effort of my days off, or on the days when I finish work early.

5. Assign each day a meal

To make this as easy as possible, I make most meals stretch 2 days. So I only have to make 4 meals a week. Any leftovers can be assigned to the days when you don’t get home until late and need to nuke something in the microwave. For example, you could make a Chilli on Monday and have it with rice. Then on Wednesday you could get home from work at 10pm and heat it up in the microwave with a jacket potato and dinner will be ready in less than 10 minutes. Or you can make fish pie on Tuesday and use it to make fishcakes on Thursday. 
 

6. Go shopping

Don’t be afraid to tweak your meal plan slightly if you see good deals. If you planned to make a roast chicken on a Sunday but once you get to the supermarket you find that Turkey is on offer for cheaper, it makes sense to change it. If you planned to have white potatoes but find that sweet potatoes are on offer and work out cheaper, get them instead.
 
 
 
Another way that you could help yourself when it comes to super quick meals, is to batch cook. 
Batch  cooking is where you make extra portions and then freeze. This means you’ll always have home made ‘ready meals’ available for you. Or you can do this with parts of meals, like home made chicken nuggets. I do this quite a lot with mainly mince based meals but need to restock my freezer as I’ve been slacking on this recently! 
 
My favourite meals to batch cook are:
Chilli
Spaghetti Bolognese
Lasagna 
Curry
Stews
Cottage/Shepherds Pie
Hotpot
Pasties
Sausage Rolls
Meatballs
Fishcakes
Nutloaf
Pizza Bases
Cookie dough
 
 
Finally, the main thing thing to remember with batch cooking is to cook, cool, freeze and reheat according to food safety standards. Foods like rice can be tricky when cooling and reheating, so make sure you know the guidelines around items like these.
Nicola, over at mumonabudget also has a wonderful blog post on Meal planning, and I particularly love her use of transparent fridge magnets to organise her meal plan. Read her blog post  to see her tips on meal planning too.
See you next time!
C.