The Sinking Fund
There always seems to be one stray expense that doesn't fit in any of our envelopes. At first we decided if it didn't fit in one of the envelope categories (Groceries, Home, Auto, Entertainment, Personal Upkeep, Mika or Gifts) then it wasn't something we should be spending money on. That lasted about three days. There will always be expenses that don't fit in those categories, you just can't let them deter you from the ultimate goal of being debt free.
We determined we needed an eighth envelope for these out-of-the-ordinary expenses. We called it the "1, 2, 3 fund." The name was inspired by the popular "52 Week Money Challenge" where you save $1 the first week of the year, $2 the second week of the year, and so on until the last week when you save $52 and have a total of $1,378. Some people take the opposite approach and do the heavy lifting right away, saving $52 the first week of the year, $51 the next week, etc. The first few months of the year were great, but around week 30, it was getting difficult to put away a large chunk of money every week. So we now take a sinking fund approach instead, which just means you sink money toward the expense over a certain amount of time.
This is how we saved up for my maternity leave. We took the amount of money we thought we would need while I was on unpaid maternity leave and divided it by the number of weeks we had available to save. It came out to roughly $40/week. We actually ended up over-saving because we didn't factor in the savings of me not driving to work 5 days a week, so we had a little left over to spend on Christmas presents.
This time of year has financially derailed us many times in the past...we love to splurge spend for the holidays. If you've just started budgeting and are working on your debt snowball, I want to encourage you to figure out what CASH is available for gifts and commit to not over-spending. Maybe increase the amount you put in your gift envelope each week from now until Christmas, but don't spend what isn't there. It is a temporary sacrifice for a long-term gain. The joy of giving is so much greater when interest charges aren't following you around like a stray cat for the next six months.
These days the sinking/1, 2, 3 envelope is used for things like wedding tux rentals, first birthday parties, and other miscellaneous events. This sinking fund approach has worked very well for us and it rarely needs more than $20 or $40 per week depending on the upcoming expense. Right now it isn't being funded since all foreseeable expenses fit into our normal envelope system.
Right now I am putting together our November budget and figuring out what's available in the Gazelle fund for this month's credit card payment. Budgeting isn't fun, there are fifteen other things on my to-do list that I'd rather be doing during this coveted nap time, but it is worth it. Having a budget doesn't mean we don't go on dates, have nice things, or buy new clothes. It means we save up for those costs, we don't shop spontaneously and we plan ahead for all foreseeable expenses. I cannot tell you what a relief it is to not play the credit card game at the end of the month (seeing which card has an available balance for groceries).
God's plan for us (ALL of us, you included) does not include debt; He wants us to be free. Free to go where He asks us to go, free to give when there is a need…free to whole-heartedly follow Him. We make less money now than we did when we first got married, but we are more free now than we've ever been. If we continue at our current pace, by the time Finn turns 2 we will be done with all debt besides the house. I want to thank each of you for your kind comments and support as we have shared this journey with you, you inspire us to keep going.
"If you are faithful in little things, you will be faithful in large ones."
Luke 16:10