Beating Broke

Personal Finance from the Broke Perspective

Should You Create Sinking Funds Before You’re Debt Free?

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You have debt. A lot of debt. And now you want to pay it off, IMMEDIATELY! You’re fired up. You’ve read financial blogs, read debt payoff gurus books, and you’re setting up your budget. Should you create sinking funds before your debt free or put all of your  money toward debt repayment?

Should You Create Sinking Funds Before You're Debt Free?

What Are Sinking Funds?

If you’re new to budgeting, sinking funds are money you put aside for irregular expenses you know will come up during the year. Let’s say you spend $1,000 each Christmas, so you decide, in January, to set aside $83 a month in your Christmas sinking fund. When December rolls around, you have all of the money you need to pay for your Christmas gifts debt free.

Create Sinking Funds Before You Pay Off Debt?
Photo by Eugene Zhyvchik on Unsplash

The Argument Against Sinking Funds

Some argue that you shouldn’t set up sinking funds until you’re debt free. What is the point of putting $83 aside for Christmas when you’re paying 15% interest on your credit card? That $83 each month would be better served if you applied it to your credit card and reduced the balance and therefore the amount you’re paying in interest. You’ll get out of debt more quickly this way.

The Flaw With This Kind of Thinking

There is one major flaw with this kind of thinking. What will you do when you need to actually pay one of these irregular expenses?

I live in Arizona, and six months of the year, my air conditioner runs night and day. During those months, my electric bill ranges from $225 to $275, depending on how warm it is outside. Then there are about two months a year in flux when the electric is $125 to $175, and, in the winter, for four months, my electric settles down to $80 a month.

My budget can’t handle such big fluctuations in our electric bill, so every month, I set aside $150 for electric. When summer comes, I have a large sinking fund to help me pay for those hot months when the electric bill will be much higher than $150. 

If I didn’t have a sinking fund, how would I pay for the high electric bill in July?

A Happy Compromise

I encourage everyone to set up sinking funds, even if you do have lots of debt. Part of getting out of debt (and staying out of debt) is changing your attitude toward money. What’s the use of putting all of your money on your debt if you have a $1,500 car repair, no money set aside, and you have to charge it and go further back in debt again? That’s not a budget roller coaster I want to be on.

But there is a compromise; if you have extra in the sinking fund after the event is over, apply that money to debt. For instance, let’s go back to the sinking fund of $1,000 at Christmas. Let’s say you’re conservative, shop the deals, and only end up spending $750 on Christmas presents. Great! Take that leftover $250 and apply it to debt. Then, in January start saving for the sinking fund again.

Sinking Funds Before Paying Off Debt?

If you’re paying down debt, make sure to create and fund sinking funds. You won’t be sorry, and you’ll be changing your attitude toward money so when you get out of debt, you stay out of debt.

Do you create and fund sinking funds each month? If not, how do you handle it when large, unplanned or irregular expenses come up?

How to Practice Self-Care When Paying Down Debt

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Dave Ramsey says that paying off debt is more of a sprint (especially when you’re gazelle intense), but if you have a lot of debt, the payoff journey may feel more like a marathon. If you keep your nose to the grindstone without a break, your physical and emotional health may suffer. Practicing self-care will help you not only remain in good health but also have the stamina to see your debt-free journey to the end. Here are some tips you may want to utilize to care for yourself while working hard on paying down debt:

Make Sure You Have a Fun Money Fund

I know, you may feel like all of your money should go on debt repayment, and, yes, almost all of it should. However, set aside a small amount for fun money for the month. When my husband and I were paying down debt, we each got $20 for the month. I used mine to buy treats at the grocery store that weren’t in my budget or we sometimes used the money to get a dessert at a restaurant together. This money should be yours to spend any way you see fit and to give you a little wiggle room in your budget so you don’t feel deprived.

Do Something Just for You Every Day

What do you enjoy doing? Some people enjoy spending time in their gardens, running, doing yoga–the choice is yours. When I was working three jobs in my 20s, I enjoyed nothing more than coming home after a 12 or 14-hour day and slipping into a bubble bath. That was the perfect way to destress and relax.

Start a Pinterest Dream Board

Do you have a major goal when your debt is paid off? Maybe you’ve always wanted to visit France, and that’s how you plan to celebrate being debt-free (after you’ve saved cash for the trip, of course). Why not start a Pinterest board of all the places you want to go and things you want to see? You can create this board for any dream you plan to realize when your money is no longer going toward debt. The best part about Pinterest is that you can make the board secret so only you see it.

Make Your Meals at Home

Let’s face it, paying off debt and working hard to make extra money can be stressful and exhausting. While you may be tempted to grab quick food, know that doing that regularly can have negative effects on your health. Take the time to make homemade food. You’ll feel better, be healthier, and have more energy.

Listen to an Audio Book


You may not have the free time to sit down and read a book, but when you’re driving to and from work, why not listen to an audiobook? It can be a fiction book you listen to just for fun, or it can be a non-fiction book that will help you in your career. Gazelle intensity is exhausting and stressful, so make sure you make time to relax and take care of yourself.

What are some of your favorite ways to practice self-care?

4 Ways to Make Sure Your Bills Get Paid On Time

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You’re busy.  I get it.  I’m busy, too, and sometimes I forget to sit down and pay my bills in a timely manner.  However, I don’t want a ding to my credit score.  Because I’m so busy with my kids and their many activities, and L.I.F.E., I use several strategies to make sure my bills get paid on time.

Here are some of my favorite strategies:

Set e-mail reminders.

For each of my credit cards, I have set up e-mail reminders.  Depending on the company, I’m sent an e-mail reminder six to 10 days before my payment is due.  I can’t tell you how many times these e-mail reminders have meant the difference between a late and on-time payment.  Everyone should set e-mail reminders for their bills, in my opinion, especially if you have a very busy schedule.

Set up recurring payments to your credit card.

While I generally avoid setting up recurring payments to my checking account, I do advocate setting up recurring payments to credit cards.  Why?  If a charge is fraudulently applied to your credit card, the credit card company protects you.  If the same thing happens to your checking account, your entire account could be emptied, and then you would miss other payments to other creditors and have to pay for bounced checks.

In addition, if you have a credit card with a rewards program, you could gain rewards simply for paying your monthly bills that you used to pay via check and snail mail.  Those points can add up quickly when you’re paying your monthly recurring bills with credit cards.  Just make sure to pay off your credit card each month.

Set up a special account for automatic payments from your savings or checking.

If you still prefer to set up automatic payments to your bank account, I’d suggest setting up a separate account just for automatic payments.  Then, if there is an error on the vendor’s part, you don’t risk paying overdraft fees on your regular checking account.

I have one account that is devoted solely to automatic payments for my husband’s student loans and our life insurance (the only two payments I have set to auto pay from our bank account).  These are both fixed expenses, so at the beginning of every month, I just schedule a transfer to that account so the payments can be deducted.  Since I don’t use this account for any other purpose, there is no worry about not being able to make other payments or bouncing checks.

Keep all of your bills in one place.

If you’re still receiving bills in the mail rather than electronically, keep all of your bills in one place.  If you use snail mail, also keep stamps there.  Then, when you’re ready to sit down to pay your bills, you have everything you need right in one place.

What are your strategies to make sure your bills get paid on time?  What suggestions would you add to this list?