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Sinking Fund

Have you ever heard of a sinking fund or thought of starting one?

If not, they are helpful to you if you want to save money and have more capital available for later. Sinking funds let you enjoy added financial flexibility while opening up more opportunities to purchase items. You can change how you manage your money and create better ways to buy whatever you want without struggling.

Sinking funds are creative and can help you find the financial stability you are striving to have in life.

What Is a Sinking Fund?

A sinking fund is a savings account in which you continue to add money over time to save for later.

Sinking funds are a way for you to save money while you prepare for any future expenditures that are coming your way. Whenever you get paid or receive extra money, you can set that money aside and save it for anything you want. It helps you save money for anything you want to buy without worrying about getting funds elsewhere. You don’t even have to think of using your credit card, paying high interest on it, or suffering a negative impact on your credit score.

You can save money for a trip, home, car, or anything else you want, but not essential for your life. Every month, you set aside money to reach your goals, allowing you to not worry about paying. That also helps you make the most of your money since you will not borrow money from a lender.

These sinking funds differ from emergency funds because they are for things you want instead of unexpected emergencies. An emergency fund gets set aside first so that if you need a medical procedure immediately, you have the money. Emergency funds are saved solely for emergencies and not for anything that a sinking fund is meant for.

Also, sinking funds are a great way to stay out of debt when you buy whatever you are saving up for. With little to no debt, you can have more financial flexibility to ensure you are ready for anything that comes your way monetarily. You can comfortably spend your money on anything you want without worrying about paying off a loan over time.

Sinking funds can take a long time to set up since you have to save your money but are helpful if you are willing to be patient.

How Do You Create a Sinking Fund?

If you want to start a sinking fund, it is relatively simple when you create a reasonable strategy to achieve it.


Save Extra Money

As simple as it may sound, your best way to create a sinking fund is to save any extra money after you cover your bills.

If you have money left over at the end of the month, you can save that in your fund for a later purchase. You can try to save money by cutting back on certain spending habits that are not necessary. When doing this, you will be able to save more money so you can spend it on what you truly want, whenever you want.

Money can be saved when you cut back wherever you can to achieve your bigger financial goals without complications.

Create a Goal


When you start creating your sinking fund, you want to set a goal beforehand to know where you are going.

If you know a car you want to save up and buy and there is a set price, you can make that your goal. The same goes for vacations. When you know how much it will cost and how long it will take to save up, you can get started accordingly. These goals give you an amount in mind so you know why you are doing everything you can to save money.

Setting goals is a good way to stay motivated when you are struggling to continue saving money.

Make It Hard to Access


Another good thing to practice when you build this sinking fund is to make it challenging to take the money out.

If you continue to set the extra money in a separate account, you will not tempt yourself to spend it. That way, the harder you make it, you will have less of an issue spending it on something else since you cannot access it easily. You can focus on saving it there and ensure you achieve your goals to get what you want.

If you want to ensure you achieve your sinking fund goal, you must make it difficult to access the saved-up money.

How Can Sink Funds Help You?

Sinking funds can help you achieve your financial goals and have the money you need in the future readily available.

  • When you have a sinking fund, you can always have help to get anything you need no matter where you are financially. With money available to you for a later time, there are more options available to you when you want to buy something extra. Instead of scrambling to get a loan or figure out how to get money, you can rely on your sinking fund to buy what you want. 
  • If you are trying to save money, a sinking fund is a great option to help you succeed in setting that money aside. You can continuously add money to your fund over time so you do not think about it or spend it prematurely. When you are struggling to save, creating a sinking fund can help you be diligent about saving the money you need.
  • Elective procedures like cosmetic surgery are expensive, making it more difficult for people to pay for them. Sinking funds are a great way to save the necessary money for cosmetic surgery or any elective surgery. With help from sinking funds, you can achieve your goals better and work towards getting anything you want without facing issues.
  • One other way sinking funds help your finances is by creating better financial security for you in the long term. If you can create a better security blanket for your finances, you can feel comfortable spending money on yourself when it is warranted. Using sinking funds, you can do this since you have extra money that is set aside from everything else that pays the bills.

When you need money for an upcoming expense, making a sinking fund early on can help you achieve your financial goals.

Is There a Better Financing Solution?

There is!

Sometimes, you do not have the time or extra money to create a sinking fund, making financing more necessary.

If you need financing for a medical procedure or elective surgery, you can see if your doctor offers payment plans and if you need to refurbish your house, hire the services of those that offer customer financing.

Denefits is a complete payment solutions platform for businesses and their customers. It offers protected customer financing for everyone since there are:

  • No soft or hard credit checks
  • Flexible payment plans
  • Better payment terms

It is an option for you to use when you need payment assistance. More medical offices and businesses are signing up with Denefits daily, making it beneficial for you to pay for services you need.