SINKING FUNDS
Turn a future expense into a monthly savings target.
A sinking fund reserves money over time for an expense you expect but do not pay every month—such as annual insurance, property taxes, repairs, travel, or replacement purchases.
Start with amount and date
Estimate the amount needed, subtract what is already reserved, and divide the remaining requirement across the time available. Recalculate when the target, deadline, or existing balance changes.
The envelope is not another bank account
You can hold several goals inside one real savings account while tracking how much of that balance is reserved for each purpose. The total reserved across envelopes should not exceed the real money supporting them.
Goals compete for the same cash
An emergency reserve, annual tax bill, vehicle replacement, and vacation cannot each independently claim the same available dollar. Evaluate them together with required bills, debt payments, and cash-flow needs.
Revisit the plan
A target date is a planning input, not a guarantee. If income or required spending changes, update the contribution requirement or target instead of hiding the shortfall.
Educational information only; not legal, tax, accounting, investment, or individualized financial advice.