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Just because you’re in debt doesn’t mean that you don’t deserve to treat yourself every now and again.
When I decided to pay off my debt, I read many How to Get out of Debt posts where people went through extreme..erm..’frugal’ lifestyle changes to save few bucks. I tried my best to mimic them hoping it would help me pay off my debt quicker.
What happened you ask?
Girl, I was miserable! I had taught myself that I didn’t deserve to purchase anything for myself until I got out of debt which was a huge no-no.
The debt payoff process can get pretty stagnant, and it’s hard to keep yourself motivated and inspired to continue pushing through. I won’t be that blogger to tell you that you should be eating beanie weenies five days out of the week because I’m sure not!
If you want that new handbag then get it—just be sure to save for it first!
What is a sinking fund?
A sinking fund is an account used to save for a specific expense or purchase. This can be used for an upcoming vacation, a new makeup vanity, or whatever else your heart desires.
How does this get me what I want?
When you’re paying off debt, all of your focus is put towards knocking down your account balances. It’s easy to feel like you have nothing left over to treat yourself to something that 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 couldn’t afford.
How do I start a sinking fund?
Many banks offer free basic checking accounts that you can set up and use as your sinking fund. If you like taking the old-fashioned route, find a container, like a pickle jar, and use it to stash your cash. Of course, if you’re someone who has a hard time resisting temptation then an actual account may be the best way to go. Out of sight, out of mind.
Figure out how much money you need to have saved for your purchase as well as when you would like to make the purchase.
For example, in six months I want to purchase a new couch for $600. To meet this financial goal, I’m putting back $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 lengthening your time frame or changing the goal altogether.
Related reading: How to Save Money When You Feel Broke
I started using Digit at the end of December to help me save money outside of my regular savings, and it’s amazing to see how such small amounts can start to add up!
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 required from you unless you manually want to add in more money.
I get daily texts from Digit telling me 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 100 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 so for the unknown.
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 hard to decipher what goes where.
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.
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.
Cheers to being able to actually afford what we buy!