Personal Finance Challenge - September - Set Up Your Sinking Funds
Welcome to the Living That Debt Free Life 2019 Personal Finance Challenge!
If you are new to budgeting, paying off debt, and managing your finances, you’ve come to the right place! I’ve compiled 12 monthly challenges to get your 2019 financially on track.
Each monthly challenge contains one of the many steps I’ve taken to help me pay off debt faster.
If you’ve been paying off debt for a while, the information in these challenges is probably nothing new to you.
But, if you’re one of the hundreds who ask me each month how I’ve managed to pay off so much debt, then this is going to be so helpful to you!
The challenge is completely free to join! Each month, we’ll complete the challenge together and chat about it here on the blog in the comments down below and on Instagram.
I’ll announce each monthly challenge here on the blog and on my Instagram Page.
If you are participating, please feel free to leave a comment down below and let me know how it’s going! And, be sure to tag your challenge-related IG photos with #TDFL2019Challenge, so I can find you and cheer you on!! (TDFL stands for That Debt Free Life, my Instagram handle).
For all the monthly challenges, click HERE.
Prior Monthly Challenges
If you have done the rest of these monthly challenges, then you have tracked your expenses, made a zero-based budget, and eliminated one recurring expense from your budget. You’ve also tried using cash envelopes to keep yourself in budget going 15 days out of the month without spending, and reducing your eating out budget. ,
If you haven’t done the previous month’s challenges, that’s ok. You can complete these challenges at any time. Here are the challenges from January, February, March, April, May June July and August.
Ready to get started? Here’s this month’s challenge!
September 2019 - Set Up Your Sinking Funds
This month’s challenge is to set up your sinking funds.
What are Sinking Funds?
Sinking Funds are a way of saving up for a known, upcoming expense, by saving a set amount of money, over time. For example, you know you’re going to need to replace the tires on your car at some point, you just don’t know when, or how much it’ll be. You know you’re going to have medical and dental costs throughout the year; the question is just when and how much? If you’re a homeowner, you know there will be plenty of expenses to anticipate throughout the time you own your home, plus property taxes and HOA dues that will come due every year.
Understand the Difference Between Your Emergency Fund and Sinking Funds
A lot of people think they don’t need to set up a sinking funds because they have an emergency fund. If something comes up, they can just pull from the emergency fund, right? WRONG!
An emergency fund is for expenses that are truly unexpected.
If you use your emergency fund for everything (including expenses you should be anticipating—like car repairs), you will just be depleting and re-building that emergency fund over time. And what’s worse, you risk your emergency fund being depleted when a true emergency occurs.
As I like to say it, sinking funds protect your emergency fund.
So what kinds of things qualify as a true emergency? Dave Ramsey sets out 3 requirements for using an emergency fund, and I’m totally on board with all of them.
First, things that are unexpected. Think getting laid off from your job, or a freak storm passes through and floods your neighborhood (Houston, where I live, had several catastrophic flooding events in recent years, and as I type this, Hurricane Dorian is threatening many in it’s path on the East Coast).
In addition to things that are unexpected, a true emergency is something that is necessary. New hardwood floors or appliances just because you want your house to look Instagram-worthy is NOT a necessary expense. A tree falling on your house and damaging your windows and walls?—now, that’s a necessary expense.
Finally, ask yourself if the expense is an immediate need. Things like repairing that gaping hole in your wall from where the tree fell and struck your house is an immediate need. A stove that still functions perfectly but is ugly to look at—not an immediate need. Wanting the latest version of the iPhone? Not an immediate need. Instead of digging in to the emergency fund, you would start a sinking fund and add to it over time to save up and pay for that new stove or iPhone.
Your emergency fund is there to save you in case of a true emergency. Don’t deplete it just because you want some shiny new thing. And don’t deplete it because you failed to plan and put sinking funds in place for expenses you should have been anticipating.
Let’s Get Started!!
Ready to protect that emergency fund and get those sinking funds set up?
For all the info you need on setting up your sinking funds, including how to set up and manage them, how much to put in each one, which ones you should set up, and a list of more than 15 sinking funds you should consider, see this post.
Final Words
Don’t forget to tag your social media photos with #TDFL2019Challenge!! I want to encourage you and cheer you on this month! I want to know which sinking funds you’re setting up!
Then meet me back here next month for October’s challenge! Good luck, everyone!! You’ve got this!! Can’t wait to see what goals you set for yourself!!
Oh! And, as always for bonus points, complete January’s Challenge and February’s Challenge, again this month, in connection with September’s challenge. That’s what I’m going to do!
