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My Sinking Funds

May 21st, 2019 at 01:34 pm

I try to prepare for future expenses by saving a bit each payday in various sinking funds. With the recent purchase of a new 5th wheel, they needed some tweaking. I update the balances regularly, which you can view any time you please by clicking on the "Sinking Funds" page link in my sidebar. This is what I am currently doing:

Car Ins & Reg - This is now for both my CR-V and 5th wheel. I am budgeting $2,700 per year for insurance and registration for both. This breaks down to $103.84 per pay period.

Car R & M - This is now for both the CR-V and 5th wheel too. I am budgeting $1,500 per year, which breaks down to $57.69 per paycheck.

Car Replacement - To replace my CR-V when the time comes. I am budgeting $1,500 per year plus my "round out", which breaks down to $64.24 per paycheck. ("Round out") is the amount needed to give my sinking funds transfer a nice rounded number).

Clothing - Current budget is $600 per year. This will change once I am no longer dressing for work. This breaks down to $23.07 per paycheck.

Electronic Gadgets - To replace my phone, laptop, what have you. The budget is $300 per year which breaks down to $11.55 per paycheck.

Emergency Fund - Not a true sinking fund, but here it is. Currently no money is being regularly added.

Gifts/Xmas - The budget here is $1,000 per year, which breaks down to $38.46 per paycheck.

Planners & Goodies - For my fancypants planners and supplies. The budget is $100 per year, which breaks down to $3.85 per paycheck.

Roth - Saving up for next year's contribution as I've already contributed 7k for 2019. The amount is 5% of my gross pay, which works out to $103.15 per paycheck.

Travel/Vacation - I am budgeting $2,500 per year, which breaks down to $96.15 per paycheck.

All together, $500 per paycheck is automatically transferred into these funds a few days after each payday. This method works very well for me. Once set up, it is so very simple and requires no effort on my part.

8 Responses to “My Sinking Funds”

  1. creditcardfree Says:

    I love sinking funds!! Thanks for sharing yours!!

  2. starfishy Says:

    I like reading about your financial processes and decisions - thanks for sharing! Question - based on the responses to Amber's retirement posts - I'm curious why you fund a Roth rather than a Traditional IRA. I have both and never know which one is best to contribute to. Wondering what you rationale is if you are willing to share? Also didn't know that limits have gone up to $7000 for 2019 - thanks for the info!

  3. Petunia 100 Says:

    Hi Starfishy - I started throwing small contributions into my Roth once I was on track to have my 0% bracket full. (Maybe 10 or so years ago?). Currently, I am doing 5% into my Roth and 10% into my 457 plan (tax-deferred). If I were to work until 65, I would have my 10% full too, but to be honest I am not sure I will make it that long. Smile

  4. Amber Says:

    Wow I’ve been blocking for years and had no clue I could add a sinking fund link 🙄🤦🏽‍♀️😂
    I like the gadget, I’m going to possibly need a new phone and laptop, I’ll add this to my list for next year.

  5. starfishy Says:

    Hi Petunia - thanks for answering! I don't know what you mean by having your 0% bracket full - or your 10% full. Where can I find more information about that? I hope you are able to retire before 65. Smile

  6. rob62521 Says:

    Good job on adding to those sinking funds!

  7. Petunia 100 Says:

    Starfishy - We are all allowed some taxable income taxed at 0%; it is our standard deduction. Suppose a single retired person is living on 18k of SS benefits and has a 300k nest egg. Using a 4% withdrawal rate, a 300k nest egg will provide 12k of annual income. At this income level, SS benefits are not taxable. If the 12k nest egg withdrawal comes from a Roth, it is not taxable either. If the 12k nest egg withdrawal comes from a tax-deferred account, it is taxable, but it is taxed at 0% because of the standard deduction. Either way, this person will pay no federal income tax. Therefore, this person is throwing money away if they choose to fund a Roth rather than a traditional.

    Once the person is on track to exceed a 300k nest egg (and have their 0% tax bracket full), making some Roth contributions makes more sense.

  8. Petunia 100 Says:

    Amber - Yes, you can make as many "My Pages" as you like, then insert the "widget" into your sidebar. I think I will put my CC rewards history on a Page too, to clean up my sidebar a little.

    Rob and CCF - Thank you. They certainly make life less stressful, don't they? Smile

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