Dave Ramsey says: Contribute to “sinking fund” for emergency use


Dear Dave,

I am following your plan and recently released myself from all debt, but I have a question. When making a monthly budget, should I be in a specific category for car repairs and maintenance, or just use my emergency fund?

– Ashleigh

Dear Ashleigh,

Congratulations on getting rid of your debts! You know, new cars, old cars, and midsize cars all have one thing in common – they’re going to need repairs at some point. Repairing your car is only a fundamental part of owning a car, and every car owner should be prepared for.

When life happens, to your vehicle or anything else, an emergency fund acts like an airbag. Only instead of preventing your face from hitting the dashboard, it keeps your finances from crumbling. When it comes to auto repair costs, my advice is to create a sinking fund within your budget. A sinking fund is a special place in your budget where you save money for specific, expensive items, like car repairs.

I know, putting money into a sinking fund every month feels as good as standing in line at the DMV. But look at it this way, if you had a car loan like most people, you would invest hundreds of them every month.

Instead, you are one of the smart people who have zero debt and can easily create a repair fund for your car by setting aside less than the average car payment each month.

Even “reliable” cars need repairs and maintenance, and a sinking fund in your budget for those kinds of things means you’re ready to handle pretty much any automotive problem that comes up.

You know you will have to pay for repairs and maintenance. It’s a thing with all cars. And when you know something is coming, it’s not an emergency fund situation. Excellent question, Ashleigh!

-Dave



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