How Do I Set Up and Use YNAB for Sinking Funds?

Introduction

Unexpected expenses can throw off any budget, especially if you have irregular income, but what if you could plan for them in advance? That’s where sinking funds come in. YNAB makes it easy to set aside money for future expenses so they don’t catch you off guard. This guide will walk you through how to set up and use sinking funds effectively in YNAB.

Quick Answer (TL;DR)

To set up and use sinking funds in YNAB:

1. Create a budget category for each sinking fund (e.g., car repairs, holidays, insurance).
2. Determine how much you need to save and by when.
3. Allocate money to these categories each month until fully funded.
4. Track expenses from these categories when the cost arises.
5. Adjust contributions as needed to meet your goals.

Step-by-Step Guide

Step 1: Identify Your Sinking Fund Categories

Sinking funds are for expenses that occur irregularly but are predictable. Common categories include:

• Car maintenance
• Medical expenses
• Holiday gifts
• Home repairs
• Insurance premiums
• Vacation savings

Step 2: Set a Savings Target

For each sinking fund, determine:

• The total amount needed (e.g., $600 for car repairs annually).
• The time frame (e.g., 12 months to save).
• How much to set aside monthly (e.g., $50 per month).

Step 3: Fund the Categories Regularly

Every month, assign money to your sinking funds before spending on discretionary categories. If an expense comes up before the fund is fully built, adjust other areas of your budget to cover it. Here's what to do if YNAB says you overspent in a category.

Step 4: Spend from the Sinking Fund Category

When an expense occurs, record it in YNAB under the appropriate sinking fund category. This keeps your budget organized and ensures the money was planned for.

Step 5: Adjust Contributions as Needed

Life changes, and so will your sinking fund needs. Reevaluate contributions periodically to ensure you’re saving enough or if you need to prioritize different categories.

Personal Insight

When I first started using YNAB, unexpected expenses kept throwing off my budget. Once I started using sinking funds, I felt more in control—no more scrambling when car repairs popped up. Now, I budget for these costs in advance, and my finances feel much more predictable.

Next Steps

Sinking funds are a game-changer for financial stability. If you need help structuring your budget to include them, I offer YNAB coaching to help you set up a system that works. Schedule a free call here.