Creating Sinking Funds Can Help You Save Money

Everyone has that bill that comes up once a year, but always seems to sneak up on you, or that family emergency that leaves you penniless and wondering how you will ever get ahead, maybe for you the one big financial struggle is paying for Christmas every year. Whatever the case, there are big-ticket items that cause us all to struggle financially.

Most of these purchases or payments are things that we could plan for if we would just do it. We all know that the house insurance is due every year, that there will be emergencies that we cannot avoid and that Christmas comes around once a year. The problem is that we do not plan for these events and therefore struggle with having the money to pay for them.

One of the best ways to plan for these items is to create sinking or lump sum funds for them, by setting aside money every month. You can do so by deciding how much money you want or need to put aside for each item. For example, how much do you usually spend on Christmas? Decide on the amount and then divide that amount by 12 if you are going to begin doing this throughout the year or if you are getting a late start, divide it by the number of months you have until Christmas or whichever month the item you are planning for is due.

You will put this money into a special account, such as a separate savings, checking or money market account. Putting the money in any of the three type accounts will allow you to keep track of the money separately and to gain access to it when you need it. Therefore, you will need to make sure that the type of account you choose to use will allow you to quickly and easily gain access to the money without paying any penalties for doing so.

You can use one account for all of your sinking funds just make notes in a notebook or on your computer in a spreadsheet of how much money you have put in for each item. Then, when the time comes to pay your house insurance the money will be waiting in the account, and when Christmas comes around, you will have money for that as well. No more feeling guilty because you haven't saved, or struggling to scratch up enough money to keep your house insurance, or to get yourself out of that emergency.

For more family budget tips visit http://www.ourfamilybudget.com/family-budget-tips.html and don't forget to sign up for the family budget newsletter.

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