Your step by step guide to managing your sinking funds✨

Sick of relying on credit just to afford the things you want? Here’s the thing, you don’t have to. You can buy anything you want without going into debt. The secret? Sinking funds.

Sinking funds are the exact opposite of “Buy Now, Pay Later.” Instead of getting what you want now and stressing over the payments later, you save first, spend guilt free and stay in control of your money.

What are sinking funds?

Sinking funds are dedicated savings pots for expected expenses. Unlike your emergency fund (which is for unexpected costs like car repairs or medical bills), sinking funds are for planned expenses✨

✔️ A dream holiday
✔️ Christmas shopping
✔️ Car insurance
✔️ Birthday gifts
✔️ Home renovations
✔️ That designer bag you need

Instead of putting these expenses on a credit card, you set aside small amounts over time so you’re fully prepared when the time comes.

It’s like pre-paying for your future life, but without the stress

Why use sinking funds instead of credit?

Imagine this: You’ve been dreaming of a trip to Thailand for months. Instead of racking up £3,000 on a credit card and paying it off with interest, you break it down into manageable monthly savings. By the time your trip rolls around, you’ve got the full amount ready to go, no stress, no debt, just enjoyment. 

Step by step guide to sinking funds

1️⃣ Decide what you need to save for

Take a look at the next 12 months and list out any big expenses coming up. Some examples:

✨ Short-term funds (1-6 months): Birthdays, Christmas, holidays, car insurance
✨ Long-term funds (6-12+ months): House deposit, wedding, big purchases

The goal is to be proactive, not reactive.

2️⃣ Set your targets

Once you know what you’re saving for, figure out how much you need and when you need it by.

For example:

• You want £3,000 for a Thailand trip in 10 months
• £3,000 ÷ 10 paydays = £300 per month

Now you know exactly how much to set aside each month to reach your goal.

3️⃣ Choose where to keep your sinking funds

There are two ways to manage your sinking funds:

✨ Separate savings pots in your bank account – Banks like Monzo, Starling, Chase let you create multiple savings pots. 

✨ One high interest savings account + a tracker – If you prefer keeping all your sinking funds in one place, just track how much belongs to each fund in our sinking fund tracker.

5️⃣ Spend guilt free when the time comes

Here’s where the magic happens. When your planned expense rolls around, you already have the money waiting.

🎁 Christmas shopping? Paid in full.
✈️ Dream holiday? Flights and hotels covered.
🚗 Annual car insurance? No last minute panic.

Track your sinking funds for free in the Financielle App here.