It may be a little early to talk about Christmas but this tip will show you how a sinking fund can help you pay for gifts without panicking in December and without going into debt.
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Transcript:
Welcome to Money Tip Tuesday from the Making Money Personal Podcast.
It is mid-March as I record this for you. We’ve had a couple of days of warm weather here in New Hampshire but we are all still recovering from Winter and everything that came with it. Christmas is likely the very LAST thing on our minds.. it was just about three months ago after all. If you are like many Americans, it is likely that you scrambled at the very last minute to get gifts for those special people in your lives.. The average person waits till about November to begin shopping and many of us wait until December 15th. Waiting until the last minute to shop is hard enough but it is even harder if you also didn’t have any separate funds saved to pay for it. This is where a sinking fund comes in!
A sinking fund is a separate account containing money to pay for something in the future. This fund or these funds can be used for whatever you want.
Lets say you plan to spend $500 on gifts at Christmas and you start a sinking fund in January. Simply take 500 and divide by 12 months. Just like a bill, every month you would pay (or transfer) $42 to a separate savings or checking account that is specifically for Christmas. You can even label it “Christmas Fund” so you know what you are saving for.
I love sinking funds. It is a stress free way of paying those items that don’t occur each month. I use them for insurance premiums, activities for my daughters like ballet and gymnastics, and Christmas! I know many people who also use them for other items like a new phone every couple of years, or a new car they know they will need to get in the future. You can do this for anything and it can even be for items you pay monthly. I love to do this for my rent every month! I take my rent payment and divide it by the number of times we are getting paid in the month and I transfer that to my rent savings account. On the first of the month, that money is there!
Do you have any additional tips or advice that will help our listeners with this topic or other financial matters? Send us an email! That email address again is TCUPodcast@trianglecu.org or look for our Facebook page and get connected!
Thanks for listening to today’s Money Tip Tuesday and be sure to listen to our other tips and episodes on the making money personal podcast.
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