Sinking Fund vs. Emergency Fund: What the Difference?
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- Опубликовано: 8 сен 2024
- So last week I had a call on my Third Channel, Ask Tommy Bryson, where I take calls from Monday-Friday from 12pm-5pm for free. And the question I got was, Tommy should buy a new car, my car just broke down and I have to use my emergency account.
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1. Let's Defined Emergency funds first
Emergency Account:
- When I was in college I saved between $6-$60 a week for an emergency over one year and I had around $2000 dollars
- Now as murphy laws says, anything that can go wrong will go wrong, and sometimes all at ones
- A few months later my Dad passed away, which meant I had to go to the Dominican Republic to help out ( which means a lot of money ) - plus I took that and rebought all of my equipment and decided I was going to dedicated 100% to RUclips and quit my job
Textbook definition:
- An emergency is for things that are unknown
- Like what happened to me, or illness or losing your job during a pandemic
- And usually, I recommend you have a minimum of 3-6 months and 12 months if you are ultra-conservative ( I only have 6 months )
- So currently for me that’s $12k saved up
Ps. If you are in debt the idea is just to save $1000 for a quick emergency fund and also through in 1% of your income per paycheck, ( but priority is to pay off debt )
2. Sinking Fund
Sinking Fund Example:
- Every year I go on a vacation with my fiancé, usually just Once a year
- This is obviously not an emergency but expenses in the future
- So instead of spending all that money at once I can save it up weekly and have enough for the vacation * which is usually $1000-$1300
- So I just divide how much money I need by the amount of the time I need ( 1 year and every week means $25 a week)
- But a lot of people put it on a credit card and then pay $100 a month and 25% interest
Textbook Definition:
- Sinking funds are for the Known, expenses and things that you can expect to happen sometime in the future
- Car repairs or replacement, Vacations, the new PS5 all of those things
- Most assets can be expected to need maintenance at some point ( so save up for those things )
Ps. SO obviously this is very different from an emergency fund, and that’s why I told the person that called me in, that he should have expected this, because of cars break down. ( ontop of that he wasn’t giving the car at least 2 car checks per year)
3. Where to Save up this money
- Now the account I use is called Sofi Money and it’s the best one in my opinion
- However though if you try to sign up and don’t qualify, then you can use the Capital 360 savings account which also works okay
What I like about the Sofi App
- Emergency can be store inside and funded automatically
- Then I can also save for sinking funds also
Save for anything
Fun vacations
Inevitable expenses
Medical expenses ( decductible )
Taxes
4. How many is too many
- Priority wise, you should do your emergency fund first, and once that funded then you can start saving up for the important sinking funds
- Like car maintenance, house maintenance, and so on ( the things you really need )
- Once that’s done you can start saving up for the little things, vacations, new wallet, whatever is you want
Remember though:
- People go into debt because they are impatience
- But if you do this, that won't be you, you can save up for things
- Even Christmas gifts
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We should be careful on money disposal if you are not spending to earn or get back money,then stop spending...
Apparently my view on the solution is to venture into trading cryptocurrency
I wanted to trade crypto but got discouraged by the fluctuation of price.
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Am a living testimony of Mr Barry Silbert
The right choice of an investment has always been the problem for me cause I know picking the wrong investment will leave a big scar in the future
Talking about your dad passing away really hit home with me. Thanks for being vulnerable with your RUclips community.
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Sorry to hear about your Dad Tommy. Thanks for another great video.
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how much would you have in a sinking fund and what would you consider besides car/car repair to be considered as sinking fund material?
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I destroyed the LIKE button.... now I need a new mouse. I REKT MY MOUSE. I'm going to keep destroying the LIKE button so I need to put it in the "Sinking Fund" because its a predetermined expense that is inevitable. Once I find a little more self control or alternatively you find another verb (whatever happens first) even perhaps a more durable mouse I can put the expense elsewhere. I'm looking into it. Another informative video. Thank you TB!
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awesome detailed breakdown, going up all 2021
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Someone is working out 💪🏾
yes sir
I feel you. Dicktuckable is a hard word to spell... Keep up the good work. That made me laugh. Thx for keeping it in the video.
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Wow, love your shows!
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Etherium is the way to go
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Hey sorry about your pops TB. I would like to know where can I put that money and have it be liquid enough to use within a week if need be? Thanks for your time
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Bitcoin is the future ,investing in it now is the wisest thing to do now especially the current rise
Yeah
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hey there tommy, I can not use m1 finance to invest in your portfolio because I'm outside the US, what other broker do you recommend me using? Thanks, love ur content :D
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You can also use digit app to help put money to the side.I'm currently using Yotta for my emergency fund.
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Hey
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Ally also does the same. Amazing organization tools .
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@@zerobudgetstories7069 SCAMMMMMER!! reported for being an A***
My way of doing it is gonna be put 10,000 as a emergency fund in SOFI cause I plan on using Sofi in the future as part of my investments. 😃 also it's better to automate it because that way its automatic and you don,t have to worry about it so 🙂. Once again GOOD VIDEO TOMMY!!!!
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Hi Tommy great work really enjoy you program, is sofi money available in Canada
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