21st Century Dad
One Dad's Thoughts, Ideas, and Feelings.
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Ease the Strain of Annual Expenses

April 13th, 2009 . by 21st Century Dad


I promised a personal finance post a long time ago. Here it is.

Frugal Dad recently wrote a post about having a sinking fund. I wasn’t familiar with the term, sinking fund, but I was aware of the concept long ago. For those of you joining me here out of context, a sinking fund is an amount of money set aside regularly to help fund irregular expenses.

In the past, whenever an irregular expense like the 6-month premium for my car insurance came due, I simply charged it. I told myself I would pay it off over time. I even gave myself extra credit, calculating the APR over the same time frame was still less than the inconvenience fee charged by the insurance company for making installment payments.

My financial health is trending upward, but I am still operating on  a cash basis.  Oh, I can get credit, but it’s hardly on favorable terms. The banks aren’t being very nice to people with good credit scores either these days. Since I am on a cash basis, I have to carefully plan for these irregular expenses.

I created a spreadsheet that helps you calculate how much of your monthly budget should go toward your sinking fund. It looks like most budgeting spreadsheets, but with additional columns. The additional columns are for quarterly, semi-annual, annual, and bi-annual expenses.

Like most people, I find it easier to look at money on a monthly basis. The biggest portion of our expenses occur at that interval. At the bottom of the spreadsheet, you’ll see a running tally of how much you need to put into your sinking fund each month. This is a fun spreadsheet to play around with. I can daydream and  run what-if scenarios all day with it.

Download the spreadsheet here.

You might notice the screen-shot above doesn’t look like Microsoft Office. With yet another frugal move, I started using Open Office. When Microsoft Office 2008 was released for the Mac, I asked myself if I should upgrade or do I jump ship for the open-source alternative? I asked myself, but my wallet chimed in before anyone else could speak.

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