Money Tips

So, What’s a Sinking Fund? + Why You Need One!

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*This post may contain affiliate links. Read my disclaimer for more info.


When I decided that I no longer wanted to be chained to debt, I read through a butt-ton of How to Get out of Debt posts. I was completely clueless as to how to get started and wanted to see how to get the ball rolling.


It didn’t take me long to pick up on a common theme. What’s that?  People going through extreme … erm …” frugal” lifestyle changes to save a few bucks.


I tried my best to mimic them, hoping it would help me pay off my debt faster.


What happened, you ask? Girl, I was miserable!


I had taught myself that I didn’t deserve to purchase anything until I got out of debt which was a huge no-no.


The debt payoff process can get pretty discouraging at times, and it’s hard to keep yourself motivated to continue pushing through. I won’t be that person who tells you to only eat beanie weenies five days out of the week because I’m not!


If you want that new handbag then get it—just be sure to save for it first!????

Pin now to save for later!

What is a sinking fund

What is a sinking fund?

A sinking fund is money saved for a specific expense or purchase. This can be used for an upcoming vacation, a new makeup vanity, or whatever else your heart desires.


Why do I need a sinking fund?

It was the use of funds that we didn’t have that got us in the financial situation that we’re in now AKA debt.


One thing that I’ve learned during this debt-free journey is that if the money isn’t there then the purchase shouldn’t happen.


If you’re anything like me, when you want something then you want it right now. The thought of waiting months for something you’re just dying to have is like torture, but having to kiss your paycheck goodbye as you pay off your impulsive decisions hurts worse.

How does this get me what I want?

When you’re paying off debt, all of your focus is on knocking down your account balances. It’s really easy to feel like you have nothing left over to treat yourself to something you actually want.


With a sinking fund, you’re preparing for a particular expense or purchase in advance. This allows you to get what you want without interfering with your other debt-payoff duties AKA putting yourself in more debt by buying something you truly can’t afford.


How do I start a sinking fund?

Many banks offer free basic checking and savings accounts that you can use as your sinking fund. I suggest using a checking account versus a savings account so you’re not subject to withdrawal/transfer limits and minimum balances.


If you like taking the old-fashioned route, use a container, like a pickle jar, or cash envelopes.


Of course, if you’re someone who has a hard time resisting temptation then an actual bank account may be the best way to go.


Out of sight, out of mind!

Getting set up

Determine how much money you need to have saved as well as when you would like to make the purchase.


For example, let’s say that in six months you want to purchase a new sofa that costs $600. To meet this financial goal, you need to save $100 each month.


Once you know how much money you need and by what date, be sure to include it in your monthly budget.


If your money is looking a little funny after you’ve added in the additional savings, consider extending your deadline or changing the goal altogether.


Related posts to check out next!











Try Digit

I’ve been using Digit for over two years to help me save money outside of my regular savings and I love it! It’s crazy to see how such small contributions add up over time!


Digit is designed for those who aren’t so hot with saving money. It actually reviews your spending habits in order to determine how much and when to save for you.


Like a recurring transfer, money is moved from your checking account to your Digit account.


Boom, it’s that easy. No work is required from you unless you want to manually add more money.

digit saving app

I get daily texts from Digit advising me of my bank account balance (not Digit’s, your actual bank account) or if any deposits have hit. You can even text back ‘commands’ for additional features.


Digit comes backed by a no-overdraft guarantee so it will never pull out more than you can afford, and you can get to your money whenever you need it.



It’s only $2.99 a month for Digit, but when you sign up through my link you can try it out completely free for 30 days!


Sinking fund vs savings account

There’s not much of a difference between a sinking fund and a savings account, but keep in mind that a sinking fund is specific. A regular savings account, or an emergency fund, is more general in nature.


You can combine your savings and sinking fund together in the same account, but this will make it more difficult to separate the funds when it’s time to make your purchase.


Besides, watching the balance rise to your targeted goal is the fun part, and if your accounts are combined then it’s harder to see your progress.




When you’ve saved up for a purchase, then you’ve earned the right to treat yourself to it. I like to think of a sinking fund as a guilt-free way to get what you want while still paying off your debt.


If you’re not the best with saving money then I highly recommend taking my FREE money saving course! I’ve gone from barely being able to save $360 per year to $4,800 and I’m sharing my strategies. Check it out here!


Resources I’m loving!

Break up with Debt email course. This free email course is for those who are ready to destroy debt but don’t exactly know how to go about it.

Here are some things you’ll learn:

  • Learn how to identify and stop money leaks that are hindering your ability to pay off debt
  • Learn three quick ways to squeeze more money from your budget to beef up your debt payments
  • I’ll teach you the top three things that have allowed me to:
    • Stay out of the “yo-yo effect”. This is when you lower your balances but turn around and run them right back up!
    • Smash through my financial goals
    • Easily turn making debt payments into an unconscious habit

Click here for more info!

Credit Sesame. Knowing your credit score is important as it shows potential lenders your likeliness to pay back your loan. Credit Sesame is a FREE way to track your credit score and analyze your debt.


Ibotta. This free cashback app supports 273 stores such as Walgreens, Kroger, and Walmart. Find offers before you shop and redeem your offers by taking a picture of your receipt. It’s that easy!

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