Sinking Funds & Expense Tracking

Submitted by paintingredroses t3_z91eaq in personalfinance

Hello! I was hoping someone could help or provide some insight on tracking expenses paid for by sinking funds.

As of now, I currently use an Excel spreadsheet to budget and track my expenses. I’m a Zero-Based budgeter, so I’m running into a problem when I’m actually using the sinking funds I’ve been saving for an extended period of time.

My Line Items 1 - Add $x to vacation sinking fund 2 - Subtract $y from vacation sinking fund 3 - Add $y as a vacation expense

The problem I’m running into, because the sinking fund transfer is NOT income, is the deduction in 2, which messes with my monthly and annual savings rate %.

Any guidance is INSANELY appreciated!

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Werewolfdad t1_iyeg14x wrote

Sinking funds aren’t savings. They’re delayed spending. Is that your issue?

If you save $500 a month for a year then spend $6k on vacation, you’d just record the $500 per month as the expense. The actual incurred expenses and the transfer out of the sinking fund to pay off your credit card would be transfers and ignored in your budget

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paintingredroses OP t1_iyeisb3 wrote

Thanks for your response!

My problem is definitely that SFs shouldn’t be included in savings.

I think I’ve decided to add the SFs as an additional expense category for the month-to-month deductions and then keep the structure I outlined above. Some of the SFs so have don’t necessarily get used during the same calendar year or at the same rate as what is saved monthly. (i.e., $6k sinking fund, but only used $3k).

Appreciate the food for thought!

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Liquidretro t1_iyf3tpc wrote

The spending doesn't change your savings rate though.

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Mysunsai t1_iyegeb5 wrote

Why is number 2 part of your savings rate calculation?

None of that sinking fund should be involved in savings rate at all, it’s all an expense, none of it is income or savings.

One method of doing it is:

At the time the expense occurs, you have an expense of $y from the vacation, and a reimbursement of $y (a negative expense) from the sinking fund.

When you add $x to the sinking fund, you have an expense of $x.

There are other ways as well, but that’s my preference.

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paintingredroses OP t1_iyehmha wrote

Thanks for your response!

The reason for #2 is because I use the zero-based monthly budget system. There should be $0 left at the end of the month. It’s not income, so I have to add the amount I’ll be spending to the spreadsheet somewhere so I don’t end up with a -$ at the end of the month.

Since it shouldn’t be included in my savings, I think I’ll add it as an additional expense category for the month-to-month tracking and keep my entries consistent with the steps I included above.

Thanks for the help!

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Liquidretro t1_iyewdo1 wrote

I use YNAB, and have savings accounts for home maintenance. I contribute to it each month, and then when I have an expense in the home maintenance category, I categorize it as outgoing from that category. Another way to think about it might be a sub account in a way that rolls up further into your budget.

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paintingredroses OP t1_iyf0c0x wrote

Thanks for the response!

I’ve tried YNAB, and it didn’t really work for me. There are a few things that I like to look at on a monthly basis that YNAB doesn’t do. Spreadsheets work best for me at this point.

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Liquidretro t1_iyf34ka wrote

You can export YNAB data but I get it no everyone one wants to pay too. They are both zero based budgeting though.

Either way you replicate a similar process. I think Wereworlddad found the root of your issue and what was throwing you off and that should fix it.

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