My Eight Essential Sinking Funds
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.