In a given year, you likely have expenses that you know are coming—holiday gifts, the family vacation you take every summer, annual homeowners association fees or maybe membership renewals. But just because these costs are predictable doesn’t mean you’re always prepared.
If you are pulling from your emergency fund or using a credit card to cover predictable costs, you might consider using one or more “sinking funds.” A sinking fund is a savings account dedicated to a particular expense that you fund gradually through regular payments. Sinking funds often have a deadline associated with them, but not always.
