Saving — Beating Broke

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

October 21, 2019 By MelissaB Leave a Comment

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?

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.

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?

5 Easy Life Hacks That Can Save You Thousands This Year

April 26, 2019 By Angelique @Healthy On A Penny 2 Comments

Once in college, I sat down and calculated how much money I spent on food-not on groceries but those coffee shop pit stops and late night meals. It was in the thousands which are crazy, but not unrealistic. We all can get busy and start spending money on convenient things without thinking. This article will show you how to do the opposite. Here, you will find some awesome tips for saving money on the things we do every day.

Carry Cash

Now, you shouldn’t carry more than about $100, but spending cash will typically encourage you to not spend it. If you use a credit or debit card you are spending the same money but it feels different. Having to hand someone your hard earned cash makes us uncomfortable and that’s a good thing. Those moments of hesitation will keep you from making impulse purchases or buying things you may want but you don’t actually need.

Keep Rebates In Mind

There are so many rebate programs that we just don’t take advantage of. There are programs for retail and grocery shopping that will give you money back when you load your receipts. Check out your insurance plans as well. Auto insurance will often give you discounts and rebates for a portion of travel, rental cars, and for things like towing and roadside assistance. Many auto insurance companies have rental car coverage included, check your insurance agreement and if it includes rental coverage, never buy it from the rental company.

Health insurance programs tend to give reimbursements and discounts for certain gym memberships, and other health-related programs. You are already paying for these types of insurance, don’t pay more than you have to for other services.

Start Loving Store Brands

Do you know the difference between many store brands and name brand products? The marketing budget. That’s it. Don’t spend up to 25 percent more on a product because you’ve seen their commercial on TV. This is especially true for higher-end grocery stores like Trader Joe’s, Publix, and Whole Foods. Their store brands are quality and so much less expensive than their name brand counterparts. This one change can save your family thousands every year.

Get To Planting

Growing your own food can really help to reduce your grocery budget. For the tiny cost of seeds and soil, you can have a huge amount of vegetable. Start with easy to grow to produce like tomatoes or spinach and expand as you learn. Also, planting trees can help you save money in a couple of ways. First having beautiful landscaping will up the value of your home, it can also reduce your energy costs by acting as a windbreak. Adding trees can lower your energy costs by about a fourth which is great

Stop Buying All Purpose Cleaning Supplies and Make It Yourself

Cleaning supplies are a recurring cost that can be expensive. There is no reason to buy something when you can make something just as effective at home. Try this easy recipe for an easy DIY cleaner that is all natural and completely non toxic.:

Start by eating a couple of oranges or other citrus fruit.You’ll need the peels. Add the peels to a large glass jar or bowl with a lid. Fill the bottles half with boiling water and the other half with white vinegar. Let it sit in a sunny place in your home for a couple of days. Then strain the peels out and pour the cleaner into a couple of spray bottles. You can use the ones from whatever cleaner you typically bought. Just make sure you rinse them out first. Then use it as you normally would.

There you have it. These simple tips will have you spending money in no time. It’s all about finding easy ways to save money every day.

Save Money on the Grocery Budget by Reducing Food Waste

March 25, 2019 By MelissaB 1 Comment

Behind a mortgage, groceries are often the second most expensive line item in the budget. If you’re looking to save more money this year, a good place to look is to reduce the grocery budget. But don’t stop there. Make sure to also look at the other side of the grocery budget—reducing food waste.

Whenever you waste food, you’re essentially dropping money into the garbage. Instead, learn to reduce your food waste to stretch your grocery budget even further. Here are some of my favorite strategies:

Look at your calendar before you shop. Do you have a busy week coming up? If so, don’t plan labor intensive meals; you just won’t have time to make them and you’ll likely have food go bad before you have time to cook it. Instead, make some meals on the weekend to eat during the week when you’re busy or plan simple recipes and buy simple ingredients. Rachael Ray’s Week in a Day is a great springboard for finding recipes you can make on the weekend to enjoy all week long.

Alternatively, you can choose simple meals to make on busy weeknights. Fresh spinach can be sautéed in minutes. Paired with a microwaved baked potato and a simple meat like a polish sausage that can be cooked quickly, and you have a fairly healthy, inexpensive meal. Another option is to keep frozen vegetables on hand to cook quickly and pair with an easy meat and minute rice.

Buy foods your family likes. Too often, people buy a bargain that turns out to be a waste of money because their family won’t eat it. Buy the foods that your family will eat, not the foods that are a bargain.

Use leftovers! Do you eat leftovers? Some people don’t like them, but I love leftovers because they offer me one meal I don’t have to cook! Eating leftovers can be a great way to stretch your food dollars. If your family refuses leftovers, try to cook only as much as your family will eat in a meal so you don’t waste extras.

Create new meals with the leftovers. Another idea is to creatively repurpose leftovers. For instance, if you cook a whole chicken or buy a rotisserie chicken, keep the leftovers to turn into other meals like chicken enchiladas or chicken noodle soup. Thanks to the Internet, you can find plenty of recipes for reusing leftovers. Some chefs, like Robin Miller of the Food Network, specifically look to make meals out of leftovers to help you better utilize your time and food.

Utilize the freezer. One of my favorite ways to reduce food waste is to use the freezer. We recently bought a large box of individual serve guacamole. I still had 8 left close to the expiration date, so I put them in the freezer, and now we just pull them out as we need them. Many meals that you make and don’t want to eat all at once can be frozen for later use.

What are your favorite strategies for avoiding food waste? Do you waste a lot of food or a minimal amount?