I never paid attention to these sorts of conversations before, because I was a financial mess and figured I'd never get to the pro-active point in money management since I was mired down by anxiety and reactivity.
Fast forward to current situation where we are much better and stable (despite uncertainties) and I have started a sinking fund for future car expenses. It's $25.50/month so that we can pay for three car registrations in February 2019.
So my question now is: Do you park your sinking funds in an additional external account that you make transfers to monthly?
Also, opinion on laddering CDs as a safety measure? This is something that my father did with my grandmother's funds years ago. Did Ima Saver do this too?
Any and all opinions appreciated.
Also what other categories do you plan for? All of our insurance premiums are monthly. I am thinking to add for gifts and maybe insurance deductibles in case of a car accident or incident.
Where do you park your sinking funds?
March 12th, 2018 at 04:21 pm
March 12th, 2018 at 05:41 pm 1520876473
March 12th, 2018 at 06:01 pm 1520877690
@ Bluebird. Thanks for the info share. We are just out of the gate, graduating from a paycheck-to-paycheck existence. I'll slowly be able to add categories and fund them! Sounds like you have a good system in place!
March 12th, 2018 at 06:02 pm 1520877742
March 12th, 2018 at 06:06 pm 1520877974
We ladder our CDs.
March 12th, 2018 at 09:54 pm 1520891672
Car maintenance 100/month
Insurance and renewal 175/month
Health care $15 this covers a copay at doctor office. I keep saving just in case I have multiple in a month like when I got the flu last month and needed meds.
Glasses/contacts 50/month. Covers contacts for a year and the copays for glasses. I make sure my glasses never go over the insurance limit.
House maintenance 50/month
left over utilities - varies. (My highest bills are 3 summer months and 3 winter months. When I don't need the amount I budget for all utilities I put the left over into a saving account for the rare months when I do go over. Nice to know I have coverage if it goes to high like when I was sick and the heater ran for a week+ when it is usually off while I am at work.)
college 50/month (covers classes I may want to take for fun at a local college)
vacations 50/month
gifts 100/month
March 12th, 2018 at 10:24 pm 1520893499
We have CDs. They were not opened originally to be laddered, but they have been opened at different times, so yes, they mature in such a way.
March 12th, 2018 at 10:53 pm 1520895235
March 13th, 2018 at 12:00 am 1520899259
These days with banks charging fees for services that had been free, I suggest you verify potential fees. You can easily transfer sums electronically with a few computer strokes. If you're using YNAB it will track projects. A simple EXCEL spreadsheet will track allocation of sums in a savings account. If a new event is planned, divide the pays by the event's budget/cost and adjust regular costs. What [hidden] fees do your insurance charge for the convenience of paying monthly? Is it significant?
March 13th, 2018 at 12:15 pm 1520943312
When I was first starting out in life and not knowing much yet about mutual funds, I got into laddering CDs and basically chased the best rates at banks all over the country. Later, when my income began to grow, I had little use for CDs because I was investing for growth with mutual funds.
Now, approaching retirement years, I find myself back into CDs, mainly because of their guaranteed safety, but yes, I have laddered them as rates are expected to gradually rise. These days my laddered CDs are with Barclays Bank (online). Some will be coming due this year and I'll likely put them in new CDs at Barclays or elsewhere, if competitive. For me, a CD is a parking place in a very safe neighborhood, and it acts as ballast for my overall portfolio, which still has a healthy stock exposure.
I would sit down and figure out (with the help of online asset allocation risk tolerance calculators, if needed) your comfort level and decide on what portion of your overall investments/savings you want to put in CDs, since they are illiquid until maturity (assuming you don't want to pay a penalty). You won't get much in the way of interest if you stick with 1 or 2-year CDs. On the other hand, interest rates are expected to slowly rise with several incremental Fed rate increases. So this in itself would be a good reason to ladder your CDs, spreading your available money into multiple CDs so you can take advantage of rising interest rates as they mature.
March 13th, 2018 at 12:16 pm 1520943414
March 14th, 2018 at 12:34 am 1520987676
March 14th, 2018 at 01:41 pm 1521034867
Now I do an annual budget and pay annual expenses that month (or, if it's a bit much for one month's income to handle, spread it over two or three). But the sinking fund method (if that's what it was) served me very well for several years!