The Best Budgeting Strategy You’re Probably Not Using: Sinking Funds

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Let’s be honest — few things are more stressful than an unexpected bill showing up when your budget’s already tight. But what if those “surprises” weren’t really surprises at all?

In this episode of Deeply Invested, Meghan breaks down one of the most underrated personal finance tools: sinking funds. Despite the funny name, this strategy can completely change how you plan, save, and spend — giving you more control (and calm) over your money.

What Exactly Is a Sinking Fund?

A sinking fund is simply money you set aside over time for a specific, known expense — something you know is coming, just not every month.

Think:

• Annual car insurance or excise taxes

• Birthday celebrations

• Holiday spending

• Vacation trips

• Home or car maintenance

Instead of letting these costs blow up your budget or land on your credit card, sinking funds smooth out your spending. You’re saving a little each month so when those expenses show up, you’re ready — no panic required.

Meghan’s “Aha” Moment: From Stress to Strategy

Before using sinking funds, Meghan constantly felt caught off guard by predictable expenses — like her car excise tax. Every year, it arrived right after the holidays, and every year, it threw her budget off track.

Now? It’s a line item in her budget. She sets aside a small amount each month so that when the bill comes, it’s already covered. No stress. No guilt. Just confidence.

That one simple shift inspired her to start sinking funds for other areas — like her daughter’s birthday party and Christmas. These aren’t emergencies; they’re meaningful moments. Sinking funds make them possible without financial strain.

Why Sinking Funds Are About Permission, Not Restriction

A lot of people think budgeting means saying “no” to fun things — but sinking funds are how you say “yes” to the things that matter. They let you spend intentionally and guilt-free. It’s not restriction — it’s permission to enjoy your money on purpose.

How to Start Your Own Sinking Funds

Ready to try it? Here’s how to get started:

1. List out all your non-monthly expenses. Think annual subscriptions, car repairs, travel, or holidays.

2. Estimate the total cost and note when it’s due.

3. Divide that total by the number of months until you’ll need it.

4. Save that amount each month in a separate account (ideally a high-yield savings account).

You can even label each savings bucket (“Christmas,” “Vacation,” “Car Maintenance”) for extra motivation.

💡 Pro Tip: Check out our free Balanced Budget Builder — it walks you through setting up your budget and tracking your sinking funds step-by-step. (Link in the show notes!)

Why This Works: The Psychology Behind the Calm

Sinking funds take you from reactive to proactive. They turn financial stress into financial confidence. 

When you know your money is working for you — even on autopilot — you can stop worrying and start focusing on the parts of life that actually matter.

Final Thought: Start Small, Feel the Difference

You don’t need to overhaul your entire budget today. Just pick one sinking fund that would make your year feel lighter — maybe that annual bill that always sneaks up or the trip you’ve been wanting to plan.

Start there. Consistency is what makes this system powerful — not perfection.

And when you’re ready, Meghan would love to hear how it’s going. DM her on Instagram @your.money.style or email hello@liveyourmoneystyle.com to share your win!