Here's how a 'sinking fund' can keep you from blowing your budget. (via CNBCMakeIt)
The holidays may still seem far off, but it's never too early to start saving for the gifts, travel and goodies that typically accompany the season. Rather than dipping into your emergency fund, though, financial experts advise creating what's known as a "sinking fund" to underwrite the costs.
By anticipating far-off costs, you're able to save a little bit of money at a time — such as $20 a month — rather than pay out a lump sum all at once, or have to save more each month in a tighter time frame.If you don't know what you're saving for, then you're "just shooting from the hip," Douglas Boneparth, a certified financial planner and president of Bone Fide Wealth,. Determine what your short- and long-term goals are and how much you need to save for each.
With the holidays a few months off, starting to save for gifts now might make the most sense. Or you might want to prioritize spending money for an upcoming trip. Whatever the goal, consider how long you have to save for it and how much you'll want to put away from each paycheck.For many people, Christmas gifts and upcoming vacations are obvious options for sinking funds.
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