● Money & small business
Sinking funds: how much to save each month for irregular bills (worked example with 8 funds)
A sinking fund is money you set aside each month for a bill you know is coming but don't pay monthly: Christmas, a six-month insurance premium, a vacation, car repairs. Instead of one painful month, you make twelve small transfers. The only calculation that matters is how much each fund needs per month, and it's simple once you write it down. You can run your own numbers in the sinking fund calculator.
The formula
Per month = (goal − saved so far) ÷ months until it's due. Count calendar months from this month to the month the bill is due. If the bill is due this month, the amount still missing is needed now.
A worked example: eight funds on 30 September
| Fund | Goal | Due | Saved | Months left | Needed per month | Planned | Status |
|---|---|---|---|---|---|---|---|
| Christmas | $1,200 | Dec 2026 | $950 | 3 | $83.33 | $100 | On track |
| Car insurance (6-month) | $780 | Mar 2027 | $575 | 6 | $34.17 | $130 | On track |
| Car repairs | $1,500 | Dec 2027 | $555 | 15 | $63.00 | $75 | On track |
| Vacation | $3,000 | Jul 2027 | $1,500 | 10 | $150.00 | $250 | On track |
| Home maintenance | $2,000 | Dec 2027 | $730 | 15 | $84.67 | $60 | Short $24.67/mo |
| Annual subscriptions | $400 | Jan 2027 | $410 | 4 | $0 | $40 | Funded |
| Vet & pet | $600 | Jun 2027 | $280 | 9 | $35.56 | $40 | On track |
| New laptop | $1,400 | Apr 2027 | $600 | 7 | $114.29 | $150 | On track |
| Total | $10,880 | $5,600 | $565.02 | $845 | 7 of 8 |
This household plans $845 a month and needs $565.02, so overall it's ahead. But the total hides a problem: home maintenance is $24.67 a month short, because $310 went on a water heater part and the $60 a month hasn't caught up. Checking each fund on its own is what catches that.
Why the monthly amount keeps changing
- It falls when you get ahead. The annual subscriptions fund already holds $410 against a $400 goal, so it needs nothing until it's spent. Money you've already saved lowers what each later month has to carry.
- It rises as the date gets closer. Christmas needs $250 more with 3 months left: $83.33 a month. If you skip October, the same $250 over 2 months is $125 a month.
- Withdrawals reset the clock. After a car repair takes $420 out, the fund has less time to rebuild to its goal, so its monthly figure goes up. That's the point: the fund did its job, and now you can see what it costs to refill.
Setting it up
- List every bill that isn't monthly, with its amount and the month it's due. Last year's bank statements are the fastest source.
- For bills that repeat without a fixed date (car repairs, vet visits), pick a yearly amount and a date a year out, then roll it forward.
- Work out the monthly amount per fund, add them up, and set one automatic transfer on payday.
- Once a month, log what went in and out and recheck the per-month figures.
The figures above come from the sample file of our sinking funds spreadsheet, where every balance, monthly amount and status was recomputed independently. The calculator on this site uses the same rule.