Updated: Jun 7, 2021
In my previous blog, I explained what Sinking Funds were. As mentioned, I found these to be an important way for me to utilise my money and plan for important events in my life, without severely impacting my budget.
This one is a personal choice, but when you have a family, it’s good to sit down and discuss what you think you should both be saving towards, together - in your Mojo account - and what you should be putting into Sinking Funds - in your Smile account.
In the Pacific, we’re not a credit card society, but we definitely are a loan society and tend to borrow more when we need some fast cash; whether from the bank, or from a loan shark.
This may work for you - but I think practising smart financial choices are key to a more stress-free life. If I think of modern day slavery, I think one of the top enslavements in modern societies is being in debt. Yes, I tend to be dramatic when I want to drive a point home.
So January is usually my ‘new year, new me’ phase - no I’m kidding… It’s the month I take stock of my year ahead and make a budget for most (if not all) of the sinking funds I use.
I’ve made a suggested list of my Eight Sinking Funds here:
1. Car repairs and services
Living in Honiara - this one’s either for you, or not; as we also have very active bus and taxi services. In the event you do own a car though, this is my first and strongest suggestion for a sinking fund.
You will definitely want to set money aside not only for repairs, but for services. I’d like to stress here that repairing your car is NOT the same as servicing it.
Too often, we have cars on our roads that are just not roadworthy, but are still used. I understand cars are a shockingly hard asset to maintain (because of their depreciating value over time, huge sigh here too), but I do think if you maintain your car through regular servicing - you can sell it off when you want, with very little guilt over who will be the next buyer.
That aside, cars will always need some love every now and then. New tyres maybe; or a simple oil change. Something always comes up, and as a car owner it is your responsibility to plan ahead for these.
Cue my next point - on our roads - our cars will never last forever, despite how much love we give them. We should always have in the back of our minds the thought of buying our next vehicle, without financing them.
(Now I am preaching to myself on this point too). Please buy your car in cash. We went for the financing route with our Pajero, through Credit Corp, who I must say are amazing; and their staff have always been superstars (especially dealing with me). That said, the financing journey has had its ups and downs - so although I’ll still say it was the right choice for us then, it isn’t what I would do now.
Please don’t think that just because you can afford the car repayment amount, that this is a smart financial choice. That monthly repayment just isn’t worth the fact that everyday your car is depreciating in value.
This one is easy to manage, though.
Simply decide how long you would like to keep your current car, and what price you are willing to go for when you buy your new car.
So whilst you SHOULD be putting aside sinking funds for your regular servicing and maintenance costs, and annual licensing; don’t forget about putting aside money for your next vehicle, too.
2. Home Costs
I’m not a home owner yet - so I won’t claim to be an expert in this area. My parents are though, so I understand the concept that home repairs are costly; and why you need to set aside money every fortnight to cater for them.
However, we recently moved into our own rented place a year ago (time goes by so quick!), and let me tell you, buying new everything’s was from Satan.
Luckily, we had started saving a year or so ago - well, more my husband - and we could afford to do this. But these are not small expenses, and this is why I have this sinking fund as second highest on my list.
Think: new refrigerator at something like SBD $8,000; new stove SBD $6,000; new couch SBD $5,000; new beds at SBD $3,000 and SBD $2,000. That’s just a few (and only the big things), and they ADD UP - despite getting some of them on special.
My advice for this is, if you are planning on moving, definitely save up a year or so in advance, before taking the plunge. Also, if you are planning to build your own home, do start saving up first before committing to the process. It hurts you far less, financially, than just doing it. Please don’t go Nike on these kinds of major life choices.
There are also little things like replacing light bulbs and taps, etc. that you need to set aside money for, so you’re not caught out.
Some of this can be cash flowed (bought straight off with the money you have available from your fortnight/monthly pay), but are much easier if they have already been planned for and are just a simple transaction of moving the money out of your Smile account and into your Blow account, for use.
3. Baby Showers, Weddings, Engagements
This one is hugely dependent on your stage of life, but this sinking fund line should really be renamed to my ‘Cultural Overwhelm Obligations’. I digressed because I don’t want this to seem like a burden - because it shouldn’t be.
For us, our current stage in life means we are not only attending birthday parties, but as young working adults we also have certain cultural obligations to fulfil. Think your cousin’s engagement and/or wedding, and baby showers - they are all a part of our lives and unavoidable, but some days they are quite costly.
Also, pro tip: Please don’t wait for an engagement to start saving up for a wedding. Remember, our culture has nuances. Like communal contributions for family weddings; and engagements - and they come up on you hard and fast if you're not ready for them.
Baby showers are another thing. I’ve combined both as they correlate and are not dissimilar. They may not be the norm for us, but they’re also beginning to become popular with us too so whilst they aren’t as expensive as an engagement or a wedding, with enough friends and multiple showers in a year, they can certainly rack up to being expensive as well.
I originally had this line item in my Smile account (where I have ALL my sinking funds), but the regularity of relatives getting married and engaged one year, drove me to putting this in my savings account (Fire Extinguisher account) because of its unpredictability.
I’ve only recently moved it back to my Smile account - so again, I stress, do what works for you (and your budget) best.
However you end up saving for these, it's just generally a good idea to be prepared for them.
4. Medical Bills
This one is a sad one to be up this high on the list but it is a reality that we have to face.
You really, really, REALLY do need to have money set aside for your medical bills (or for your health insurance, even if your work covers for it).
In Solomon Islands, you do not always have cover for medical and health insurance, and with our public health system, people don’t really think about saving for this. I want to stress the importance of having money set aside for an emergency though, just in case!
Think about a life threatening condition that may crop up, or an operation or procedure you may need that you just can’t get done here. Our health system is limited, and we can only get as much out of it.
One can’t predict when we could get sick or become suddenly debilitated; but you CAN prepare, and there are two ways you can do this.
Firstly, start a sinking fund with a reasonable amount put towards it fortnightly/monthly.
Second, if you can afford it - I also strongly recommend you get health insurance. I list the different insurance providers available in Solomon Islands, further into a blog here.
I’m not sure about you, but as an asthmatic, and a mother with a young child and family, I have absolute peace of mind knowing that with health insurance, we can manage any of us getting sick and needing specialist care, if it came to that.
This is only number five on my list because I’m OCD about this, and one of my love languages is most definitely, Acts of Service.
Anniversaries as you can tell, are a big deal for me, and I like having something saved for them. Some years I won’t spend it, but it’s definitely nice to take the thinking out of it and automate my sinking fund standing order for this, so I know I have money available if I wanted to splurge.
Also, money isn’t key to having a nice time! One of E’s love languages is definitely Quality Time, so I’ve learnt from bitter experience (haha!) that our ideas of date nights aren’t always on the same frequency.
Read about my ideas for a cute no-spend date night here.
6. Annual Holidays
This is sixth, because it ties into #5 and also has more regularity, than the rest after it.
Think about the other holidays apart from your anniversary, that come up every year - Valentines Day, Independence (7 July, here in Solomon Islands), Christmas, etc.
Most of these holidays will involve spending some kind of money, so of course - plan ahead and set aside a specific amount for them.
Christmas for example, may not always be a huge thing for us in the islands, but they’re usually when we get together with our extended families, or join Carol’s in the Islands - and we are not always prepared for this (I speak for myself), nor do we already have presents bought for our family (also speaking for myself here).
Decide on your holiday budget and start to put aside your money for them early. This usually means figuring out how many months you need to save.
Trust me, you will be so proud of yourself when you pay for everything relating to your holidays, in cash, with money you made (and saved) all on your own!
7. Recreational Holidays
Everybody needs a time out - to not only avoid burn out - but to spend some quality time with their loved ones.
My husband and I talk about travelling a lot - particularly for our son so he can get to experience new places. The secret to this whilst also being on a tight budget, for us? Our Rec Leave Sinking Funds - propped up, of course, with both our holiday pays.
If you’re new to the ‘spend your own money’ game, like I am - you’ve probably made the choice of taking a small loan before a holiday - which usually means bringing your holiday home with you with your loan repayments that go waaaaay beyond those three or four weeks of recreational leave. I feel you - sometimes our holiday pay isn’t enough for what we have planned.
This is my advice though - live within your means (or below, if you can afford it). If the holiday you have planned can’t be paid for in cash - hard truth? - you can’t afford it!
Planning ahead means you can afford those plane tickets, accommodation and spending money for your vacation, when the time comes.
Another pro tip? Even if you end up not using this budget line every year, putting aside something* is always better than ignoring it, if you are not planning for a vacation this year. You might find a great deal for a weekend away (cue: Parangiju Lodge or Ginger Beach, or something along these lines) that you and your family would love. This is the sinking fund for it!
8. School Holiday Activities
Our son is five and it is only JUST dawning on me that I need to set aside money to keep my little engaged, outside of school.
I’m a bit of a nerd and mummy needs some quiet time some days, so can you imagine my distress at having my son incessantly chattering (read: yelling. My son has no inkling of an inside voice) to me while I’m trying to read a report, or get some work done before the weekend is over and the 9-5 grind starts again?
To run off the energies of being five and a boy, we have the joys of Rove Children’s Park (I have misgivings some days on this one, given the somewhat adult crowd) and the indoor playgrounds around town that are literal gifts from heaven. There’s also the idea of taking him to a hotel pool, or the beach.
Most of these things cost money though. And when you have your little spitfire at home during school holidays, these little expenses rack up hard and fast.
I like to keep this sinking fund for those days.
That way, I get to spend quality time with my little while he gets rid of some of his nervous energy; and we get to go beddy-byes nice and early when we get home so I can get some work done. Win-win!
And so there you have them - my suggestions for sinking funds!
Again, I must stress - these are a personal choice. You do not have to do every single one of them, but from my experience, it’s easier to have them, than not.
So whilst you are prioritising paying off your debt AND saving, please remember your self-care routines and don’t forget to put money towards these too.
How Do You Do That?
Take a look at how you’ve spent money over the past couple of years on these different activities. If some of those amounts are quite high, they may warrant a sinking fund so you can manage your usual expenses like groceries and rent, etc.
Not every expense warrants a sinking fund though, so my way of figuring out whether I need a sinking fund or not, is seeing whether I can fund it from my fortnight without making a huge impact on my budget. If I can’t - off to the sinking fund account (Smile) it goes!
Some fortnights are definitely easier to get through than others, but having a plan for where every dollar of your money is going makes for a hassle-free life, so you can focus your energies on other things that matter to you.
How do you manage your expenses?
Tell me about it in the comments below!