Ep 126 | The #1 Thing Sabotaging Your Savings (and How to Fix It)

Tired of surprise expenses stealing your savings? Learn how the sinking fund approach can protect your savings and get you back on track for retirement.

Increasing your financial stability is key to reaching financial freedom.

What You’ll Learn in This Episode:

•Why unexpected expenses are the biggest stumbling block to retirement

•How the sinking fund method will help you protect your savings 

•3 steps to grow your sinking funds with purpose and ease

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Transcript

 If you've ever felt like just when you get a little savings going, boom, something happens and it's gone. This episode is for you. I was in a retirement forum recently. And this was a comment made. I will never be able to retire. That's just a fact. I know I talked about this a little bit last week, and but this one goes on.

I don't make enough money to save very much. Every time I get some money saved up, something inevitably happens and I have to use it. Frustrating. Right. I know you can relate. I hear this from many of my clients. Many of the people I talk to, and I know, you know, as an individual, you're being smart with money, but you feel like life keeps interrupting your plans.

Well, I have the solution for you. Okay. The solution is to build sinking funds instead of just emergency funds. This is an often overlooked strategy and is the biggest stumbling block I see for individuals. They don't know about these, they're not sure about this, or they're just trying to save a one lump emergency fund, man.

Whew. The struggle I had on my journey for that and was able to. Get myself through it and finally found a community where people are teaching it and talking about it in a different way. That's what I am sharing with you today. This small shift could be what finally helps you. Number one, feel like you're making progress and then bolster that belief that you can retire.

So maybe you've tried budgeting, cutting your spending, working overtime to help solve this problem, but you're still left feeling stuck. This was my client. She came to me and she says, I, I'm, I just spend too much. I'm creating so much debt. I need your help. And as we started working together, she said, you know, I understand budgeting.

And she did. She had her own system, but it wasn't working. Hey, you are probably relating really well to my client, and so working with her and teaching her that the sinking funds were the missing component to finding that stability in her money. That that was what was missing and why? Number one, she felt like she was overspending, which is not necessarily true and that, you know, she could actually get her budget to work.

Here's what she said after we worked together and then I will share with you the solution. She says, I went from paycheck to paycheck and making minimum payments on my credit cards to paying off $5,000 of debt and saving 2,500 in three months. Wow. Powerful. I was so grateful I could help her. She's a hard worker.

She really knows how to manage money, but this big gaping hole, that's why I call it the biggest stumbling block. I've seen it in a lot of my clients and it, like I said, it's a concept that. Is new-ish. I know it's talked about a lot more on my journey. You know, they're like, emergency funds save for three to six months just in case of job loss.

Now, they're not wrong. They're not wrong, but they were skipping an whole entire other part of, you know, savings of emergency funds. I, it didn't make sense to me. I'm like, why am I saving for that when my situation, and I know not everybody is in this? That's why I said yes, for job loss, it is important and it needs to be noted and labeled as job loss, but at 1% chance I was gonna lose my job 1% chance.

So why am I setting aside money for that when, what am I supposed to do if I need. You know, and I started thinking about it. I started thinking about it. What if I need something to, oh, the roof is gonna have to be replaced. Oh, the air conditioner goes out. All of these things, all of these unexpected things that people share, that people talk about.

Those are what are called sinking funds. You know what? What a better term than sinking funds, because what you're doing is you're setting aside money that is going to have to be committed to something somewhere. Now, as we talk about it, there are some of these funds that actually have a date associated with them, and then there's others that they're going to happen.

We just know they are through our ownership of the things that we have, we're gonna have to pay it. Ugh. And even if you are prepared with this money, it's really not a fun area to spend, but better to give it up cash as opposed to put it on credit and have it hanging, hanging, hanging there.

Sinking funds as I teach you how to implement. I think the idea of what they are. Will come to your mind a little bit easier. These take time to build out to to think through all of them as well as to be able to fund all of them. And we're gonna discuss that. How do I start implementing this? The first step, you are going to list all of your annual semi-annual, quarterly.

Maybe every other month. Expenses. We are really good about all of our monthly bills, we know they're coming every single month. We are prepared for that. We know we gotta pay that, and then we quote, have all of the rest of our money. It's those things such as car registrations. They might call 'em car tags where you live.

Insurance premiums that are paid, you know, every six months as opposed to every month. These are expenses that we are committed to. We've signed up for it. We've got a date on it. It's just because it's not monthly that it gives us that. Huh. Crap. You know, I forgot it was due. This was exactly my client that I was sharing about.

She's like, oh my gosh, yes. She's like, I gotta pay for my car registration in two months. I'm like, you set the money aside. And, and when they are that quickly, it's like, oh my gosh, how am I gonna be able to do this? Well, after you pay that in two months, then you've got 12 months to start saving that amount again.

Don't write it off 'cause you've paid it, you've gotta stick money away. These expenses happen on the regular, but we forget them because it's not monthly. And it's more not, you know, the often, so we forget about them. We forget about them. Not because we mean to, but just because life usually happens on this pattern, and that's what you remember.

Some other things to consider for this portion of your sinking funds, kids', birthdays, Christmas summer, vacation can be in there as well. You know, these things that you do on the regular have happened on the regular. You've gotta have of it set aside. I've always said when people are like, oh gosh, Christmas, I don't have money.

Okay, Christmas comes every single year, December 25th, so on December 26th, we need to start planning for that next year. And I know that is a hard concept, but if you can start tackling that one thing today. The rest of it will start making sense. How much did you spend? Do you wanna spend that again?

Was it a little over or is it gonna be less because somebody is not gonna be around? Whatever it may be, you start planning for it. Define the amount you need and when. And like I said, if you have a whole year makes that amount much smaller. But as you are approaching it, get those things that are coming up first out of the way.

Set that money aside, set that money aside and not just spend it because it's free this month. It's not technically free. And hopefully you will get in this rhythm of, I need this much every month for all of these things. Okay, we have a second category. For this area that's a little more emergency fund type.

Now I want you to, to start thinking about savings for the things you own. 'cause you might be a renter, you might not own your home, you might not have a car where you live. Whatever they may case may be, this is where you start thinking about the things you own. Car home health. Within the home, there are things that are going to wear out break, need a repair,

with a car, you might have insurance. You probably have insurance, but there's an a deductible. That money needs to be set aside. You've gotta meet that deductible before the insurance will kick in. You know, if it's your fault. Not speaking about that, but same with your home. If you can claim it on your insurance policy, you've gotta have that deductible money set aside that safety net, that feeling of, oh yes, crap, this happened.

That was awful, but I'm gonna lean into, sit into my insurance, and they need, you know, $500, a thousand dollars before they get started. Set that aside. Start thinking in this sense of those expenses first. That is how you are going to build your stability. That is how you're going to be just like my client and be able to pay off your debt and increase your savings because you're not overspending for those things that you forgot.

I know it may seem counterintuitive, but three months and she was able to figure it out. Let me cover those real quickly. Again, syncing funds without implementing this in your budgeting system, in your money management system is a big stumbling block. This is going to be your reason for continuing to use that credit card, or like my client, the feeling that she was overspending.

It wasn't true. She wasn't overspending. She was forgetting these things, and so then she's like, oh my gosh, I spent all my money and I, I have to pay for this, which she knew she was committed to. We've just gotta prioritize how that's coming through. Now, as I say that word, prioritize, yes, these should be prioritized, but I also want you to prioritize retirement savings, 5% at a minimum.

Get that in there, then start setting these aside. Make sure that you are building for the things happening in the future so that you are prepared. This may seem counterintuitive to being able to amass a lot of savings, but you won't feel hurried, shuffled upset that this, you know, pile of money is not still there.

You shift your mindset to thinking, oh man, I'm glad I had that there for, you know, that repair, or, I'm glad I can do that for this. We moved just a year ago establishing doctors, man, they wanna run every test again, they're brand new, they need to get a level, whatever. I understand it to a certain degree, but I was so grateful I had my sinking fund for medical.

I was able to pay our deductible, able to pay for these tests. Although, like I said, it is not fun, it's not a fun expense. Those are elsewhere, and we'll talk about that in another episode. But really having this there was not any headache, stress, worry on our part as we're maneuvering through this, and then now it's just gonna take time to build that back up again.

And knowing that that is what it's earmarked for. I know earmarked is a government word. I worked for government for 32 years. That's what I do. But label it, label each and every one of these things. That is why I think the standard emergency fund can be number one off-putting to even do, but how is it serving you?

How is it serving you? Label the things that you need, set the money aside. Label 'em in those accounts and know how much you have for each and everything. When you're like, oh, I have savings. Make sure you double check your labels. What have you labeled out there? What are you saving for? You can do this not only for those anticipated emergencies, put every fun item you want.

This is your. Priority system, your priority level to getting to where you need and making sure that you've created number one, stability and security financially so that you're able to grow into reaching that retirement. If you are wanting support and implementing this sooner than later, I would love for you to schedule your retirement roadmap session.

I would love to support you in building your savings priority schedule, and help you figure that out. Understand how this works with what you've got going. I'm sure a question popped in your head. I would love to help you get past that, get moving on so that you're able to send so much more money to retirement savings.

Where do you sign up for that session? Head over to Elevate Finances us slash roadmap and schedule your session today. All the information there. A way you can connect with me on a free call if you still have questions, but I would love to support you on getting rid of this biggest stumbling block that a lot of people that I talk to, that I hear from, that I read about, that I work with, this is a missing component.

Not just that financial literacy, budgeting isn't taught, but the sharing of the information that you see out there, this is a component that is still missing. And like I said, there is a community that is now talking about it in a different way. Hopefully you've seen it before, but how to implement that is what I just walked you through.

If you're wanting assistance with implementing it quicker. I would love to support you, so thank you for being here. Good luck on creating your financial stability and heading towards your financial freedom. We'll see you next episode.