Sinking Fund / Freedom Account

[missmanny]

I am wandering if anyone keeps an account like this and what you experience has been with it.

I have decided to use a savings account that I set up a while ago before I opened my ING account to store my EF in.

I have a lot of annual expenses as well as Christmas and birthdays etc to budget for and it just seems that it equates to almost one every month and I am sick of having to redo the buget to encorporate it.

I have the following annual bills (please tell me if you have any others that I may not have thought of).

Car insurance
Car registration
Car servicing (well twice a year)
Home inusurance
Christmas
Birthdays for family
Doctors Vists (well this is intermitant but thought better to have money aside if I need to go rather then have to redo budget)

What I have done is averaged how much each of these things cost me every pay period, added them all up and will transfer that ammount into the savings account so that when they become due there will be money enough to pay for them. I have also included a small buffer ammount so that I can grow a little bit of a cushion.

Does anyone do this and does it work for you? is there anything that I should be wary of when doing this?

This new found organisation is a bit foreign to me - I am generally reactive to bills rather then proactive.

[Ceashels]

Along with your list, we included:
household items (things like a hole punch or clear containers for our lunch items)
bigger house repairs (furnace, water heater type of things)
hair cuts as I won't cut Greebo's hair
clothing
vacation (his folks are out of state so we save extra for when we go)

We also have a fund for books and other media for our entertainment (the Big Bang Theory came out on DVD.... so that is where the money will come from for that!)

[Laura2]

I would also add some for a yearly vacation..whether it is only a few dollars a month for a camping trip or a few hundred for a big trip. That way you will also be rewarded in the end and it will be fun to see your account grow knowing that you have that to look forward to.

[missmanny]

Laura 2 - good idea. although we are planning a big vacation next year overseas - probably south america so I am already started saving for that.

DSO's parents have a holiday unit at the beach 2 hours away so we usually vacation there, it does cost money though in petrol and food while we are there even if the accommodation doesn't cost us anything so I think that I will add that to the list.

[missmanny]

ceashels, thanks for those thoughts, I have a fairly large "blow money" allowance for myself that generally covers those things for myself. DSO and I keep seperate accounts until we are married so he takes care of himself as well.

That is definately something to think about once we combine money though. because lord knows I spend more on those sorts of things then he does, then again he spends more on Golf clubs then any one in the world does I'm sure so we even each other out.

[Sonnenwende]

I try to keep a sinking fund of about $500 on tap at my local brick and mortar. It is just too inconvienent right now to ship it out to ING or HSBC. I use that account too regularly and the interest would be negligible at best.

Just looking at the past, little costs us more than $500 and most expenses run in the $100-$250 range. I throw about $50 a pay period, more when I can. I try to get about $150 a month tossed in there. I use it for car repairs, car and rental insurance, and certifications.

[MomToTwoBoys]

I had wanted to do this but between the debt payoff and our current bills, we wouldn't be able to do both. We decided the debt payoff was more important and any other "extra" cash (like tax credits that we don't get monthly) would go into the freedom fund. Our list is as follows:

1) Matthew's bus fee - $165/yr
2) Dakota's school fee - $80/yr
3) Matthew's school fee - $80/yr
4) Lunchroom Supervision Fee - $200/yr (this starts next September)
5) Matthew's school clothes - $150/yr (includes sneakers, pants, shirts, socks, etc.)
6) Dakota's school clothes (same as Matthew's) - $150/yr
7) Christmas - $1200/yr ($100/mo)
8) Birthdays for both boys - $200 (includes cake and presents)
9) Vehicle registration fee - $70 plus GST (once a year)

What I did not include and why:

Matthew's and Dakota's eyeglasses - These are paid for through the health spending account that is given to DH each year. It's 200/yr and if it's not used that year, it carries over to the next year for a total of $400. It never goes above $400.
Car maintenance - DH hasn't taken the car to get the oil changed and I don't know how much it'll be until he does. When I find that out, I will include that amount into the freedom fund account.
Me and DH's birthdays - we don't get old.
Property tax - budgeted every month
Car Insurance - budgeted every month
House Insurance - budgeted every month
Clothes for DH and I - I buy myself clothes every two and a half years, DH gets them when he absolutely needs them.

What I could budget and why:

Gas for trips to MIL/FIL for Easter and Christmas - I can't put a solid number on something that fluctuates based on someone else's speculations.
Computer maintenance - DH and I already decided that if one computer went or something in the computer went, we wouldn't upgrade until we could upgrade the entire system. Instead, I am putting $100/mo into the freedom fund account to build a brand new computer when the time comes, for the both of us. Total: $2400 maximum.

Grand total: $4615

Once we pay off the debt snowball in about eighteen months, then we can devote more to the freedom fund account based on the kids getting older, etc. As it stands, we need to contribute $385 per month into the freedom fund starting this month. This does not include house repairs, however, which is a gigantic chunk of cash. We need a new roof and furnace in the next three years or so, plus redoing our bathrooms.

[itlw8]

I don't keep multiple accounts I have started using a ledger the first $100 is and EF and not touched

We do have a second account which is actually a second checking account that is rarely used ( the infamous boat fund) which we decided to use part to pay the car ins .


my plan is to keep track in the ledger of the money as it builds and long range dreams then move to an account that builds more interest as it grows.

our catagories for now are

car ins
Christmas
new energy efficent windows
tankless water heater
truck replacement fund
6 months living expenses
boat fund
help the kids fund


I know that one seems silly but at times they do have problems and I want to be able to help if I can so I am planning for it this time.

And saying no when I can not... and all children are not created equal when it comes to being responsible and paying money back.

[chevy_chick95]

I do not have these in place as of yet. I just learned how to screw my money-smart head on

however they are in my 2009 budget.

Category Monthly $ added Total amount i want
car mainentance $41 $500
Car Registration $8 $50
eye dr $5 $200
Vet Bills $15 $200
Christmas $15 $200
Clothes $15 $200
Birthdays $9 $100

[missmanny]

good lord. how is it that is so cheap to register your cars, mine here in australia costs $520 for the year!

[Moonblossom]

I also have a fully funded FA/SF account I have many of the items list. plus

Education costs since I have 2 children still in school

Medical Co-pays

Car Registration (mine is also low $44 a year)/ Service

Gifts

Christmas

Personal (i.e. hair cuts)

Computer (we play online games)

Job requirements (once a year job licenses)

I love it and plan to keep it forever its the best thing we ever started I never worry about where money is coming from to pay for these items. I used our tax return to get mine started.

[ladykemma2]

home taxes/insurance
trash
home maintenance 300 a month!
home owners association
flood insurance
termite contract
a/c heat maintenance
oil change
car maintenance
car insurance
car registration
car inspection
ez tag (toll road)
new car fund
computer upkeep
computer replacement
endocrinologist annual
travel summer
optometrist
school startup
dentist
co-pays well woman exam, skin cancer check, mammogram
vet bills
xmas

i put aside 572 every two weeks for these expenses. before, i would have gone shopping!

i am still not able to fund new car fund or computer replacement

[hollyhill]

I had wanted to do this but between the debt payoff and our current bills, we wouldn't be able to do both. We decided the debt payoff was more important and any other "extra" cash (like tax credits that we don't get monthly) would go into the freedom fund. Our list is as follows:

1) Matthew's bus fee - $165/yr
2) Dakota's school fee - $80/yr
3) Matthew's school fee - $80/yr
4) Lunchroom Supervision Fee - $200/yr (this starts next September)
5) Matthew's school clothes - $150/yr (includes sneakers, pants, shirts, socks, etc.)
6) Dakota's school clothes (same as Matthew's) - $150/yr
7) Christmas - $1200/yr ($100/mo)
8) Birthdays for both boys - $200 (includes cake and presents)
9) Vehicle registration fee - $70 plus GST (once a year)

Once we pay off the debt snowball in about eighteen months, then we can devote more to the freedom fund account based on the kids getting older, etc. As it stands, we need to contribute $385 per month into the freedom fund starting this month. This does not include house repairs, however, which is a gigantic chunk of cash. We need a new roof and furnace in the next three years or so, plus redoing our bathrooms.

I also plan to do debt snowball first. But what do you do about the yearly expenses in the mean time????

[missmanny]

Holly, I don't think that there is any reason not to start a sinking fund for anticipated expenses or irregular expenses, thins is that when they come up and need to be paid you will have to tap into your snowball money anyway in order to pay them..
My thoughts are that this sort of fund will just get you more organised and proactive about intermittant bills.

[TheRootedNomad]

Mine looks like a combination of yours and Ceashels. We also cycle our quarterly bills through this such as our water and garbage bills. The biggest chunks go to home maintenance, car insurance, and vacation. (Most of our vacation money is actually gas money as we generally just go to see family)