What better time to start organizing your finances in 2022 than the beginning? One way to do this is to create a sinking fund to save for your large occurring expenses.
This possibly can be outside of your monthly expenses however they are recurring. This could be the planned vacation (once we are able to take those again), a large purchase such as a car or a home or even moving into a new apartment.
Here are four sinking funds that you want to start in 2022:
- Car expenses:
We all that the unexpected costs can come with owning a car. However, it’s not mentioned that keeping up with the payments can be difficult also. Though the lender may be able to help if you face a financial hardship there is still the expectation that you will pay the monthly payments. Building a sinking fund with at least 2 payments reserved will relieve the stress of worrying about making the payments.
This can also be with car insurance as well if you are not opting for monthly payments having a sinking fund for bi-annual or annual payments will take the pressure of having to scrape the amount up with little time to spare
This should be a given to save for a vacation but according to Credit Karma, 51% of Millennials and 49% go into debt for summer travel. Creating a sinking for the summer vacation would alleviate going into debt for this. Having a detailed itinerary of expenses plus emergencies and fun spending.
3. Shopping Sprees:
With Affirm, After Pay, Klarna, and many others that allow purchasing products in payment installments. However, if this is not used responsibly it could increase the amount of debt you can accumulate and defeat the purposes. So, setting a schedule for and on shopping within the seasons i.e., spring, summer, winter, and fall, and setting a certain goal for this amount.
We often underestimate the costs associated with moving. They are often hidden and can cause serious damage to our budgets. With the understanding that housing markets are at an all-time high and that rental costs are projected to rise 3% to 5% this year, it is important to create a fund for this as most properties will require at least a deposit and part or all the rent for the first-month rent.
If you are planning to purchase a home as closing costs, as well as the percentage down, can vary, please prepare for that as well as unexpected costs that can arise. However, this decision should not be rushed as this is a long-term investment that should only be made with careful planning and consideration.