When you hear the word “budget”, what is the first thing that comes to mind?
For many, a budget could mean categorising expenses such as groceries, rent, bills and clothing, as well as tracking monthly spending and living within your means. It seems simple, so why do so many people struggle to stick to a budget?
One of the reasons is a lack of planning for larger expenses. Despite putting money aside for a few months, many people find themselves dipping into their savings to cover expenses such as school fees, car insurance, flights, housemaid visas or their rent.
This is where a sinking fund can help to keep your budget afloat and minimise your financial stress by spreading the cost of expenses throughout the year.
Sinking funds are used to cover large, expected expenses that you are likely to incur over a 12-month period. They are different from daily and monthly expenses, such as your electricity bill or pet food. These expenses are typically large and would not be covered by your monthly income.
They also tend not to occur every month and can, therefore, be overlooked when people track expenses and estimate how much they spend.
If you aren’t paying close attention to your finances, these expenditures can derail you and even land you in debt.
They also differ slightly from savings goals, which are usually used to pay for one-off items – think luxury holidays, a new car, a house deposit or a big wedding – that may take a year or more to save up for.
A sinking fund, on the other hand, covers recurring, necessary bills or annual celebrations, such as Eid or Christmas, annual car service and insurance, medical payments, school fees or house maintenance, to name just a few.
Once you set aside money in your sinking fund, it is there for you to use for future payments and fees. The use of sinking funds is a method in which you give your current money a future purpose to be spent – and eases the pain of paying a large bill all at once.
It is important to note that the aim of a sinking fund is different from an emergency fund. An emergency fund is money set aside for the purpose of unexpected financial crises, such as a medical emergency, a job loss or unplanned car repairs.
It is usually a static number equal to three to six months of your expenses. Generally, this pot of money is kept separate from the sinking fund.
How do sinking funds work? The first step is to plan ahead. Use a calendar or talk to your family to work out all the large expenses you will probably incur in the coming year. For each expense, evaluate whether it will be paid from your monthly budget or your sinking fund.
Once you’ve calculated an estimate of all expected expenses in the year ahead, add them together and divide by 12. This is the monthly total that you transfer to your sinking fund account to stay on top of your expenses.
It is helpful to open a sub-account to your current bank account or a new savings account to keep your sinking fund separate from your daily expenses.
Sinking funds are used to cover large, expected expenses that you are likely to incur over a 12-month period
Alison Soltani,
ounder of LeapSavvySavers.com
I would overestimate the amount you need for a sinking fund to provide a buffer in case one of your expenses is larger than planned.
Some people choose to factor in all expenses in a single sinking fund account, while others prefer to open a different account for each item.
This could be, for instance, separate accounts for travel, gifts and festivals, among others. This is up to you, but generally the fewer sinking fund items you have, the easier it will be to manage your expenses.
Sinking funds offer many benefits, including peace of mind because you are covered for upcoming expenses. They also help you to save and invest regularly because your larger expenses are spread across the year.
Sinking funds also add a layer of financial armour to your budget and help to keep your finances afloat – and your money goals on track.
Alison Soltani is the founder of LeapSavvySavers.com
F1 drivers' standings
1. Lewis Hamilton, Mercedes 281
2. Sebastian Vettel, Ferrari 247
3. Valtteri Bottas, Mercedes 222
4. Daniel Ricciardo, Red Bull 177
5. Kimi Raikkonen, Ferrari 138
6. Max Verstappen, Red Bull 93
7. Sergio Perez, Force India 86
8. Esteban Ocon, Force India 56
Hili 2: Unesco World Heritage site
The site is part of the Hili archaeological park in Al Ain. Excavations there have proved the existence of the earliest known agricultural communities in modern-day UAE. Some date to the Bronze Age but Hili 2 is an Iron Age site. The Iron Age witnessed the development of the falaj, a network of channels that funnelled water from natural springs in the area. Wells allowed settlements to be established, but falaj meant they could grow and thrive. Unesco, the UN's cultural body, awarded Al Ain's sites - including Hili 2 - world heritage status in 2011. Now the most recent dig at the site has revealed even more about the skilled people that lived and worked there.
Hamilton’s 2017
Australia - 2nd; China - 1st; Bahrain - 2nd; Russia - 4th; Spain - 1st; Monaco - 7th; Canada - 1st; Azerbaijan - 5th; Austria - 4th; Britain - 1st; Hungary - 4th; Belgium - 1st; Italy - 1st; Singapore - 1st; Malaysia - 2nd; Japan - 1st; United States - 1st; Mexico - 9th
Duterte Harry: Fire and Fury in the Philippines
Jonathan Miller, Scribe Publications
AI traffic lights to ease congestion at seven points to Sheikh Zayed bin Sultan Street
The seven points are:
Shakhbout bin Sultan Street
Dhafeer Street
Hadbat Al Ghubainah Street (outbound)
Salama bint Butti Street
Al Dhafra Street
Rabdan Street
Umm Yifina Street exit (inbound)
The specs: 2018 Volkswagen Teramont
Price, base / as tested Dh137,000 / Dh189,950
Engine 3.6-litre V6
Gearbox Eight-speed automatic
Power 280hp @ 6,200rpm
Torque 360Nm @ 2,750rpm
Fuel economy, combined 11.7L / 100km
How to help
Call the hotline on 0502955999 or send "thenational" to the following numbers:
2289 - Dh10
2252 - Dh50
6025 - Dh20
6027 - Dh100
6026 - Dh200
Ant-Man and the Wasp
Director: Peyton Reed
Starring: Paul Rudd, Evangeline Lilly, Michael Douglas
Three stars
Other promotions
- Deliveroo will team up with Pineapple Express to offer customers near JLT a special treat: free banana caramel dessert with all orders on January 26
- Jones the Grocer will have their limited edition Australia Day menu available until the end of the month (January 31)
- Australian Vet in Abu Dhabi (with locations in Khalifa City A and Reem Island) will have a 15 per cent off all store items (excluding medications)
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Killing of Qassem Suleimani
Remaining Fixtures
Wednesday: West Indies v Scotland
Thursday: UAE v Zimbabwe
Friday: Afghanistan v Ireland
Sunday: Final
What are the influencer academy modules?
- Mastery of audio-visual content creation.
- Cinematography, shots and movement.
- All aspects of post-production.
- Emerging technologies and VFX with AI and CGI.
- Understanding of marketing objectives and audience engagement.
- Tourism industry knowledge.
- Professional ethics.
BMW M5 specs
Engine: 4.4-litre twin-turbo V-8 petrol enging with additional electric motor
Power: 727hp
Torque: 1,000Nm
Transmission: 8-speed auto
Fuel consumption: 10.6L/100km
On sale: Now
Price: From Dh650,000
Warlight,
Michael Ondaatje, Knopf
How Sputnik V works
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MATCH INFO
Delhi Daredevils 174-4 (20 ovs)
Mumbai Indians 163 (19.3 ovs)
Delhi won the match by 11 runs
ENGLAND SQUAD
Goalkeepers: Jack Butland, Jordan Pickford, Nick Pope
Defenders: John Stones, Harry Maguire, Phil Jones, Kyle Walker, Kieran Trippier, Gary Cahill, Ashley Young, Danny Rose, Trent Alexander-Arnold
Midfielders: Eric Dier, Jordan Henderson, Dele Alli, Jesse Lingard, Raheem Sterling, Ruben Loftus-Cheek, Fabian Delph
Forwards: Harry Kane, Jamie Vardy, Marcus Rashford, Danny Welbeck
The specs: 2018 Mercedes-Benz E 300 Cabriolet
Price, base / as tested: Dh275,250 / Dh328,465
Engine: 2.0-litre four-cylinder
Power: 245hp @ 5,500rpm
Torque: 370Nm @ 1,300rpm
Transmission: Nine-speed automatic
Fuel consumption, combined: 7.0L / 100km
Champions parade (UAE timings)
7pm Gates open
8pm Deansgate stage showing starts
9pm Parade starts at Manchester Cathedral
9.45pm Parade ends at Peter Street
10pm City players on stage
11pm event ends
MATCH INFO
Chelsea 1
Alonso (62')
Huddersfield Town 1
Depoitre (50')
UAE currency: the story behind the money in your pockets
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Our family matters legal consultant
Name: Hassan Mohsen Elhais
Position: legal consultant with Al Rowaad Advocates and Legal Consultants.
