A sinking fund is great for saving up to purchase a variety of things or pay sizeable bills that we know are coming at some point. I have sinking funds for many things that I am saving up for. They help to take the pressure off, especially where coming up with a large sum of money in a short time is concerned.
What is a sinking fund?
To me, a sinking fund is like a piggy bank where you stock away money bit by bit. The difference is that you do this more intentionally and set aside certain sums of money from each pay cheque to do this. Some people have different savings accounts for different sinking funds while others may keep cash on hand or in a safe deposit box or something of that nature.
Say for instance, you want to take the trip of a lifetime in two years and it will cost a pretty penny. A travel sinking fund would be ideal to cater to this bit by bit over time. This means there will be no loan to repay after the trip. how exciting!
How to Start and Build on a Travel Sinking Fund
Firstly, it is important to know the total amount of money for the vacation or trip you will take or even have a ballpark figure. We don’t want to save blindly and end up way below target then have to resort to loans and so on. Financial freedom is the name of the game and having this travel sinking fund is essential to enabling this. Knowledge is power, as cliche as that is, so know how much you need to save before starting.
Once this is decided give yourself sufficient time based on your salary, to save incrementally over whatever time you need. This is where being slow and steady wins the race. No amount is too small and when extra money comes your way, you can throw that into the pot too.
For example, I plan to gift my dad a trip, that is a once in a lifetime opportunity, next year. I now save a certain sum each month for this and will come out ahead of budget to create a bit of a buffer.
Secondly, set realistic time goals to save what you need, put the money away where you can’t just go and use it for other purposes and practice patience – easier said than done but it’s doable. I find keeping the anticipation for the trip helps me to push through. Having an emergency fund is essential to helping you stay out of your sinking fund. Watch the video in the link to learn more about this. I also have a travel emergency fund when I travel. I will share about that too. I am the person who often returns from a trip with money left over because I practice these things and they are becoming habitual.
Work 9-5, Save and Travel Smartly
It is possible to work 9-5 and travel your own way. If you have a limited amount of vacation days and you want to go far and beyond, you will need to spend more than others who have more time. Fast travel is often a bit more expensive. I find having a travel sinking fund enables me to do this and may benefit others as well. For the most part, the way many of us travel as we getting older change as well. We want more creature comforts than when we were travelling in earlier years. We may also, now be travelling with a spouse and kids so need a bigger budget. Therefore, a travel sinking fund is good for all of us who like to stay on a budget and enjoy financial freedom.
Research, plan and safe incrementally to see the world on your own terms as you live in financial freedom. This is something I like to practice.