Some expenses don’t happen on a monthly basis. They might be something that is needed every few months or even less often. If you buy certain things in bulk, such as toilet paper or paper towels, you might only buy them every other month, or every few months. Other examples might be things like insurance if you pay the premium in full every 6 months, or subscriptions you pay for annually.

It’s easy to overlook these in your budget, especially if you don’t need to purchase them in a specific month. But if you haven’t planned ahead for them, you could find yourself in a negative financial dilemma when they do come up.

On the other hand, if you have set aside money for these things, your budget doesn’t need to change when they are due and you don’t have to dip into your savings or do without something else in your budget plan that month.

Setting money aside for these things each month is commonly known as a sinking fund. It grows as you put money in and sinks as you take money out.

I’m not fond of the name “sinking fund” because the word sinking feels almost like a losing battle. I prefer to call them “rolling funds“. To me, it sounds more productive. The money is consistently “rolling in” and when it is needed it “rolls out”. But that’s just a personal preference. Call it what you want. It works the same way regardless.

Creating a Rolling Fund

To determine the amount you need to set aside each month, divide the total amount by 12 to get your monthly contribution needed. Then you add that amount in your monthly budget under a line item specific to that expense.

Let’s use Christmas for an example. If I want to spend $300 a year on Christmas gifts, I would divide $300 by 12 to get $25. Then I add a line item to my monthly budget like this: “Christmas Fund – $25”

It might look a little different the first time you do it. Let’s say I haven’t saved anything at all this year for Christmas. It’s May so if I want to have $300 for Christmas this year, I need to divide that by how many months I have left, which is 7. In this case, I need to save $42.86 per month, beginning this month.

If I continue doing this for my Christmas Fund, Beginning in January, I will only need to set aside $25 per month because I have an entire year to save for it, but for now, it would need to be more because I have less time to save before the funds are needed.

Types of Rolling Funds

Many people that use this method of planning for expenses do so for things like Christmas, birthdays or other holidays, insurance premiums, healthcare expenses, auto expenses, etc.

I have quite a few of them. Before I knew what a rolling fund was, I had decided it was frustrating to try and come up with large sums of money at random times throughout the year, and decided I was going to plan ahead better.

Some things were easy to figure out, like insurance premiums and gifts, but others I had to guess at first. I took my best guess at any regular expense I could think of, and then kept record of all the actual expenses for 1 year so I could get a better idea of what I needed from that point forward. Here’s a list of some of the the rolling funds I have in my budget.

• Auto/Renter’s insurance
• Auto maintenance (includes oil changes, routine maintenance items and some extra for unexpected things like a belt needing to be replaced, etc.)
• Pet expenses (includes vet visits, medications, food, treats, toys, and miscellaneous items)
• Gift fund (includes birthdays and holidays)
• Health expenses (includes co-pays, medications, dental cleanings, and extra for unexpected things)
• Annual subscriptions
• Vacations
• Hygiene
• Household supplies

Some of these things are annual expenses, some of them more or less often. Now that I have a general idea of how much I spend on them each year on average, I break that down into a monthly contribution and when the expense happens, I don’t have to worry about how I’m going to come up with the money.

I keep all of the money for these funds in a separate savings account specifically for this purpose. When one of these expenses comes up, I just transfer the money out. But I am regularly putting specific amounts into that savings account each month.

I keep a list of how much money is going into and out of each fund so I always know where I stand and if the cost of something goes up, I make an adjustment to the amount I contribute each month based on the new information.

Summary

Whether you’re saving for a regular expense, or just for something in particular, like a big trip, or a new whatever, if you plan it right, you can make things much easier on yourself by creating a rolling fund, or two, or three…

Spreading expenses over the course of a year is much easier than trying to come up with it at the last minute. You’ll be less stressed and well prepared if you use this type of fund.

Keep track of all the funds going in and out, and make adjustments when necessary. And give yourself a pat on the back when you realize you have the money you need when you need it because you planned ahead using your rolling funds.