Sinking Fund for Your Household?

by Oct 18, 2021Blogs By Incomet

Sinking Fund for Your Household?


The team at Incomet had written a guide to using sinking money to be debt free for the corporate crowd, now due to popular demand, we’re here with another guide on the same subject but this time around we talk about sinking money and its use when it comes to the expenses of your household!

When it comes to a household budget, if you do not keep a track of the incomings and the outgoings then you’d almost always end up running short at the end of the month. The problem with household budgets is that they only talk about the things that you usually spend each month. They do not contain the aspect of long-term ongoing debts, and this is exactly where a sinking fund comes to the rescue!


What is a Sinking Fund? A Quick Recap & The History/Economic Meaning of “Sinking Funds”


Let’s deviate away from the household budget aspect a bit. Sinking funds are used in economics since the 1700s! they were first introduced to reduce the national debt in Great Britain. In modern times, they’re used by companies to set aside money that they use to pay off debt or retire their bonds. There is no problem in using this methodology for household expenses, so let’s get cracking!

A sinking fund is about managing the expenses that you know you’d have to pay out but are not part of your day-to-day normal spending. The things you use your sinking fund for, might not pop up every day but only a few times or even once every year. 



A Sinking Fund for Household can be used for one-off spends like:


  • Visits to the dentist.
  • House Repairs.
  • Clothes for growing kids.
  • Birthdays
  • Diwali
  • Holidays 

Having a sinking fund also enables you to not turn to credit to pay for things and attract high-interest rates. However, it’s important to note that a sinking fund IS NOT the same as savings in general and you shouldn’t be treating it like that either. 


Planning Its Use


Make a spreadsheet and start tracking what you need and how you need to save for the same. Knowing the targets is quite literally half the battle won. Work out to figure how much plan to pay for everything. 


The 4 Questions You Need to Ask Yourself Before Starting a Household Sinking Fund


Question Number 1: What are you saving up for?


Knowing the goal helps a lot in the journey of working towards it. Do you often feel short on cash at the end of each month? Or run into debt too easily? Ask these questions to yourself before you take the next step.


Question Number 2: How much do you need?


Once you’ve figured out the goal, calculating the amounts by dividing the sum by weeks/months wouldn’t take that much time.


Question Number 3: How do I track it all?


Make use of modern and advanced fintech apps, OR you could simply do it the old-fashioned way and use a pen/paper. It really doesn’t matter. The goal here is to get the job done, not how and via what medium it’s done!


Question Number 4: Where to Save the Money?


Use a new account, it’s always best to keep this money aside physically and mentally. In 2021, all you need is 10minutes to open a bank account online without speaking to anyone from the bank! Take advantage of this seamless future and simply go with the flow!


That’s it from the team at Incomet for this week! See you in the next post!