Episode: 384 - The Simple System That Ends Money Panic
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What if I told you most financial emergencies aren’t actually emergencies?
They’re just expenses you didn’t plan for.
Car repairs. Christmas. Back-to-school. Birthdays. Vet bills. Insurance deductibles.
None of these are shocking. None of them are rare. And yet, when they show up, they feel urgent and overwhelming.
That’s how debt happens.
The difference between constant money stress and total confidence often comes down to one simple system:
Sinking funds.
Let’s break it down.
What Is a Sinking Fund?
A sinking fund is money you set aside a little at a time for an expense you know is coming later.
That’s it.
It’s not complicated. It’s not fancy. It’s intentional.
If it’s predictable, it’s not an emergency.
Christmas doesn’t “sneak up” on you.
Car maintenance isn’t random.
Birthdays happen every year.
But when we don’t plan for them, they feel like emergencies. And when they feel like emergencies, most people swipe a credit card.
A sinking fund breaks that cycle.
Instead of reacting, you’re prepared.
Step 1: Identify What Needs a Sinking Fund
Think about the last 12 months.
What expenses stressed you out?
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Car repairs
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Vet bills
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Christmas
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Vacation
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Kids’ sports
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Home repairs
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Insurance deductibles
If it happens yearly or semi-annually, it needs a fund.
Most families only budget monthly bills: rent, groceries, utilities.
But real life isn’t just monthly bills.
If you don’t give these expenses a place in your plan, they’ll take over your plan later.
Step 2: Do the Math Backwards
This is where it gets empowering.
Let’s say Christmas costs you $1,200.
If you start in January, that’s $100 per month.
If you wait until July, now it’s $200 per month.
Same expense. Very different stress level.
Take the total amount you need and divide it by the number of months until you’ll need it.
That’s your monthly sinking fund amount.
This isn’t about saving huge chunks all at once.
It’s about consistency.
Small, steady deposits change everything.
Step 3: Decide Where to Keep the Money
People always ask this.
Do you need a separate account?
You’ve got options:
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One savings account and track categories manually
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Multiple savings accounts (I personally like separating them)
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Bank “buckets” if your bank offers them
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Old-school cash envelopes
The method doesn’t matter.
What matters is this:
Keep it separate from your regular spending.
If it sits in your daily checking account, it will get spent.
Out of sight. Out of mind. On purpose.
Why Sinking Funds Change Everything
Here’s the emotional shift.
The car breaks down.
Instead of panic, you transfer money and pay it.
Christmas arrives.
Instead of debt, you enjoy it.
Your kids need new cleats.
The money is sitting there.
You go from reacting to being prepared.
And that builds confidence.
How to Teach This to Your Kids
Kids don’t learn money by accident. They learn by watching you.
If they see stress and swiping cards, that becomes normal.
If they see planning and progress, that becomes normal.
We’re taking our granddaughter to Disney Paris when she turns 10. She just turned nine, so we’re deep in the planning phase.
We created a savings chart for her to color in every time we save money for the trip. She also has her own spending money tracker.
Recently, we were at an event with a gift shop. She wanted something.
We told her no.
Not because we “can’t afford it.”
But because we’re choosing Paris.
She wasn’t thrilled.
Two weeks later, she received birthday money. When we asked what she wanted to do with it, she said she was saving it.
Why?
“Because then I’ll have more for Paris.”
That shift happened fast.
She’s learning delayed gratification at nine years old.
Instead of “we can’t,” it’s:
“We’re choosing something better later.”
That’s powerful.
Make it visual. Use charts. Put it on the fridge. Track the progress together.
Prepared families don’t panic. They plan.
How to Start Without Overwhelm
Don’t walk away and create 15 sinking funds.
Start with one.
Pick the expense that stresses you out the most.
Or the next big one coming up.
Set up an automatic transfer so it happens the same time your paycheck hits. When it’s automatic, you don’t feel it as much.
Progress builds momentum.
Let’s Recap
A sinking fund is money you set aside monthly for predictable expenses.
It is not your emergency fund.
Emergency fund = unexpected crisis.
Sinking fund = predictable expense.
To start:
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Identify recurring yearly expenses.
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Divide the total by the months until you need it.
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Keep the money separate from daily spending.
If you have kids, involve them.
Make planning normal.
Because when planning becomes normal, panic disappears.
Resources
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Transcript
Amber:
What if I told you most financial emergencies aren't actual emergencies at all? They're just expenses you didn't plan for. And the difference between constant stress and total confidence with your money, one simple system. Today I'm going to be talking about it.
Announcer:
You're listening to the Debt Free Dad podcast with Brad Nelson. Brad and his co-hosts experienced the anxiety of living paycheck to paycheck before learning the fundamentals of financial success. They are now on a mission to empower regular people to pay off their debt for good and enjoy happier, less stressful lives. Keep listening for inspirational interviews, tips, tricks, and practical advice to gain financial freedom.
Amber:
Thank you for listening to the Dead Free Dev Podcast, where we help everyday, normal people like you take control of your finances and live a happier, less stressful life. I'm Amber, your host for today's episode. And my husband and I saved and paid off over$54,000 in just 20 months. And we've been living debt-free outside of our mortgage since 2018. After listening to this episode, if you're ready to take things to the next level, if you're sick of living paycheck to paycheck, if you want to reduce financial stress in your life, build a savings that's there for all of life's emergencies, and finally pay off your annoying debt for good. Well, we've created an incredible free resource for you here at Dev Free Dad. And I'll be sharing more details at the end of this episode. All right. So what is that one simple system that I just mentioned? Today we're talking all about sinking funds, what they are, how they work, how to set them up, and how to involve your kids if you have them, so your whole family is on the same page. Because this is one of the most practical tools for you to stop living in reaction mode when it comes to your finances. And once you understand it, it's actually pretty simple. So let's break it down. First, what is a sinking fund? A sinking fund is money you set aside a little at a time for an expense you know is coming later. That's it. It's not complicated, it's not super fancy, it's just intentional planning. And here's the key idea: if it's predictable, it's not an emergency. Car repairs aren't shocking. Christmas doesn't just sneak up on you. Back to school happens every single year, you're ready. Birthdays also every single year. But when we don't plan for them, they feel like emergencies. And when they feel like emergencies, what do most people do? They swipe a credit card. That's how the cycle continues. So the goal of a sinking fund is to break that cycle instead of reacting, you're prepared. Step one, identify what needs to be a sinking fund. I want you to think about the last 12 months. What expenses popped up that stressed you out? Was it car repairs, vet bills, Christmas, vacation, maybe kids' sporting events, home repairs, insurance deductibles. If it happens yearly or semi-annually, it needs a fund. Most families only budget monthly bills, groceries, that kind of thing, right? But real life isn't just bills. Real life includes the stuff that comes up. If you don't give those expenses a line in your plan, they'll take over your plan later. Number two, do the math backwards. Here's where it becomes empowering. Let's say Christmas costs you$1,200. If you start in January, that's$100 per month. Now, if you wait until July, that's now$200 per month. Same expense, very different stress level. Take the total amount, divide it by the number of months until you need it. That's your monthly sinking fund. This isn't about saving huge amounts at once, it's about consistency. Small steady deposits change everything. Step number three, deciding where to keep your money. Now, people always ask this: where do I keep my sinking funds? Do I need a separate account for my sinking fund? You have options. You can use one savings account and just track what every dollar is for. You can use multiple savings accounts like I do. I like it kind of separated. There are some bank accounts like Allied Bank in the United States that allows you to have buckets. Or you could just go the old school way and have some cash envelopes tucked away at home. Whatever method you use, it doesn't matter. Use what's best for you. What matters is that the money is separate from your regular spending. So you don't want this in your regular daily checking account. Because if it sits in that checking account, it will get spent. So those are the simple three steps to start your sinking funds. And why sinking funds change everything? The car breaks down, instead of a panic, you transfer the money and pay this bill. Christmas shows up instead of debt, you have the money to spend for your allotted Christmas plans. Your kids need new cleats. Money's in there for the kids' events. The emotional shift is incredibly powerful. You go from reacting to being prepared, and that builds confidence. Now let's bring in your kids for a minute. If you have kids, this is one of the best teaching tools that you have. Kids don't learn money by accident, they learn by watching you. If they see a card being swiped and stressful conversations, that becomes normal to them. But if they see planning and progress, that becomes normal to them. Now, here's a fun thing that we are doing with our granddaughter. And we told her that when she turned 10, we were going to take her to Disney. And she just turned nine. So now we're really getting into those planning stages. And we created a chart for her to color in every time we saved money for the trip. And we said we need this amount of money. And we're going to tell you how much we're saving. And every time we save some money to go towards that, you get to color in one of the pictures. And then we also made her a spending money one. So she'll get money sometimes for birthdays, different events, she'll get change or whatever. And she has a piggy bank. So she now has her own spending money chart to color in as well. And we were recently at an outing and she wanted to go to the gift shop and she wanted to buy something. And I told her, I said, we're not going to buy anything today because we plan to come to this outing. We paid to come and we're not going to buy things today because we already spent our money on paying to come and we're saving money for Paris because we're going to Disney Paris. So this is like a big trip. She kind of, you know, grumbled or whatever. And we said, remember, we told you if we spend our money on something else, we're going to have less for our trip. And she grumbled and groaned. And I left the gift shop and I left her with my husband. And honestly, I was fully expecting my husband to come out with something for her. And they didn't, I guess they had a conversation and she said how awful G Ma was. And they had this conversation and they left. So we left and we dropped her off at home. And then the following week, we had picked her up again. And we were talking about some money that she had gotten from her great-grandfather. And what do you want to do with it? And yada yada. And we said, like, you know, and she goes, Well, I'm going to save it all. I said, okay. And then something else popped up. And we said, Well, you have money for that if you wanted to take some of that money from your great-grandfather and save the rest. And she goes, Well, no, because then I won't have as much for Paris. You guys, this happened within like two weeks span. So she's already clicking into if we spend this money right now, we won't have as much for our trip. And she's already thinking about the things that she's going to buy when she's in Paris and the things that she's going to do when she's at Disney. And she's kind of already doing this. So she's nine. And this is a great tool for you to get your kids involved. So pick one family goal. Maybe it's a vacation like us, maybe it's a themed weekend, a weekend getaway, something fun and add that visualization to it. You could have charts. We actually have, I'll link them in the show notes. We have free savings charts that you can color in. So you can involve your kids in these. You could use them for yourself, car savings, that kind of thing. They're actually really cool. So make sure you grab that at the top of the show notes. Make it visual and print the picture, put it on the fridge, make it a thermometer, whatever you want to do. And I personally did this when we were saving for our house after we became debt-free. We were saving for our house down payment and I had like this big chart and it just made it more fun. So every time that you add money to that sinking fund, you're going to update the chart and they're going to see the progress, right? And if you, you know, maybe say no to McDonald's and you say no, not today, we're not going to do McDonald's today. And it's not no all the time, right? It might be no now, but we'll do it later. If you saved the$20 on McDonald's or whatever it is in your area wherever you live, you can maybe say, okay, well, we're going to now add that to the sinking fund because we we didn't spend it, or we didn't spend as much on our takeout budget and we actually have some left over. So now we're going to add that. And when they start to see the things start to happen and then the fun that they have later on, it's going to make so much more sense to them. And it's less about saying, like, we can't afford it. It's more about saying, like, we are choosing not to get takeout today because we want to have an amazing trip in a few months. And this is really going to teach them some delayed gratification. And this is a skill that they're going to take forward into their entire financial future. So, how do you start without overwhelming yourself? You don't want to walk away from this episode and create 15 sinking funds. Start with one, that one that stresses you out the most. All right. Whatever stresses you out the most. Or it could be your next upcoming thing. Maybe you know you need tires for your car and you haven't saved anything yet. The next season's coming up. Like we need to make sure we get those tires. Set up an automatic transfer. Or unless you're doing cash envelopes, that's fine too. Even if it's a small amount, all right, progress builds momentum. So set this up and put it in a place where it's out of sight, out of mind. When it happens at the same time as your paycheck comes in, you really don't necessarily see it and it doesn't hurt as much, right? So I love the automatic transfers. So let's recap this. All right. A sinking fund is money that you set aside monthly for predictable expenses. This is different from your emergency fund, right? The emergency fund is for emergencies that happen that you know are going to happen, but you never know what it's going to be, right? Sinking fund is for predictable expenses, Christmas, car repairs, that kind of thing. Step one is identify the expenses that happen every single year regularly. Step two, take the total amount and divide it by the amount of months you have until you need it. Step three, keep the money separate from your daily spending. And if you have kids, get them involved. Make it visual, make it consistent, make it normal. Because prepared families don't panic. They plan. Now, if you're sitting there thinking, okay, I'm ready. I'm done living paycheck to paycheck. We've got something for you. It's called Simplify My Money. And it's sent straight to your inbox every Sunday. It's simple, it's practical, and it walks you step by step through how to take control of your money without feeling overwhelmed. You'll get easy strategies that actually work for normal everyday people. No complicated spreadsheets, no financial jargon, just real tools to help you reduce stress, build savings, and finally start making progress. If that sounds like something you need, click the link at the top of the show notes and sign up for our newsletter. Thanks for hanging out with me today. I'll catch you on the next episode.
Announcer:
Thanks for listening to the Debt Free Dad podcast. Connect with us on Facebook, TikTok, YouTube, and Instagram. Just search Debt Free Dad. If you found value in today's episode, please leave us a rating and review. We so appreciate it. For resources, show notes, and links mentioned in today's show, visit debtfreedad.com. Catch you next week.
