Let’s clear something up: paying off debt doesn’t mean you have to pause your entire life or stop preparing for important financial needs.
In fact, one of the best tools I use while aggressively paying down my student loans is sinking funds—and yes, you can too!
🧠 What Exactly Are Sinking Funds?
Sinking funds are just mini savings accounts for specific expenses you know are coming. It’s like telling your money, “Hey, I’m going to need you in a few weeks/months, so go sit over here until I call on you.”
Unlike emergency funds (which cover the unexpected), sinking funds help you prepare for the expected—without wrecking your budget when the time comes.
🛠️ Why I Still Use Sinking Funds While Paying Off Debt
When I started my financial freedom journey, I had over $100K in student loans. After paying off my credit cards and car loan, I was laser-focused on tackling the student debt mountain. But I also knew life doesn’t stop just because I’m budgeting hard.
Here’s the truth:
If you don’t plan for known expenses, they’ll still come—and now they’ll be sitting next to your debt trying to get your money’s attention.
My Real-Life Sinking Funds:
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🎂 Birthdays & Holidays (Christmas comes every year, y’all!)
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🚗 Car Repairs & Maintenance (Even an oil change can hurt if unplanned)
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🏥 Medical Needs (Vitamins, OTC meds, co-pays, etc.)
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🏡 Household Goods (Paper towels, toilet paper, cleaning supplies)
I treat these just like bills and contribute a small amount each paycheck. That way, when the need pops up, I’m ready—no stress, no credit cards, no guilt.
💡 How Sinking Funds Actually Help Me Stay Out of Debt
It might feel like saving money while in debt is counterproductive, but hear me out:
Without sinking funds, I’d be forced to:
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Swipe a credit card for holiday gifts or a tire replacement
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Pull from my debt snowball extra payments
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Stress over every little expense that isn’t in the regular budget
Sinking funds keep me financially prepared and emotionally at peace. They allow me to plan with intention, not panic in reaction.
💰 How to Start Using Sinking Funds While Paying Off Debt
You don’t need a dozen separate savings accounts or a six-figure income to start. Here's how I do it in a simple, sustainable way:
1. List Out Upcoming Expenses
Think about the next 3–6 months. What’s coming up?
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Car inspection due?
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Family birthday next month?
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Need to restock household items?
Make a list. Anything that costs money and is likely to occur belongs here.
2. Pick 3–5 Priority Sinking Funds
You don’t have to start 10 at once. I keep it manageable with just a handful. Focus on the ones that hit your budget hardest or most often.
3. Decide How Much to Save
Let’s say Christmas is 6 months away and you want to spend $300.
That’s just $50/month or $25 per paycheck. Totally doable, right?
4. Automate or Track Manually
You can:
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Use a budgeting app or digital sinking fund account
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Use cash envelopes or physical folders
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Track it on paper like I do—I love seeing my progress and watching the amounts grow!
✍️ My Personal System for Sinking Funds
I use my digital budget planner and track all my sinking funds by category. Each time I get paid, I allocate a small amount to each fund before throwing extra at debt.
My planner even includes:
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✅ Sinking fund tracker pages
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✅ Monthly goal breakdowns
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✅ Paycheck allocation sheets
(Shameless plug: If you want a planner that keeps your debt and sinking funds organized in one place, [check out the “Mo’ Budget, Less Problems” Budget Planner – it’s designed for real-life budgeting!])
🙌 Why You Can (and Should) Do Both
So many people believe it’s either “all in on debt” or “save for the future,” but that’s a false choice. Financial freedom is about balance—paying off what you owe while protecting yourself from going backwards.
Think of sinking funds as your financial safety net, keeping you from falling off the progress you’ve already made.
You can still aggressively attack debt and be smart about upcoming expenses.
💥 Final Thoughts: Your Budget Should Reflect Your Life
Just like you don’t have to stop living because you're in debt, you don’t have to stop planning either. Sinking funds are one of the best tools I’ve used to make my budget sustainable—and honestly, more peaceful.
💬 Tell me below:
Are you using sinking funds yet? If not, what’s stopping you?