I need to start sinking funds. I think that's a great idea. Just to put say 420 in an envelop everyy paycheck. Make 1 for car expenses (1 for car repairs/oil changes, 1 for registration/taxes), one for medical expenses for when we have to make a trip to the dpctpr (I had to visit the cardiologist this week, and it was $75). Then 1 for any household repairs (like if our washer, dishwasher go out). I think that's a tremendous idea. Just slowly add to it.
May I make some suggestions?
I think the "envelope" system is a good start for people who cash their paycheck and have cash in hand. Most people either have direct deposit or deposit a check at their bank. In that case a virtual envelope system works well. This is why I preach using Ally or some similar bank. When I log in, we have one checking account and around 10 savings accounts. Being able to give a name to each one keeps it all separate and make it easy to see what money is where, and most importantly, where $ is needed. If all of these funds were combined into one savings account, seriously my financial organization would collapse. I'd be a mess. Having them separated keeps me organized, even if one account had $0, like our Christmas account does most of the year, it still shows me that every time I log in.
My husband likes to keep some cash in a safe in case ATMs all crash and that's handy sometimes too but if a cash envelope system might be tempting to let's say order pizza delivery, then keeping it more out of sight would help in the long run. Our cash in the safe is not an EF nor is it earmarked for anything in particular.
As for medical expenses, do you or your wife's employer offer a Flex Spending Account? If so, have you set one up? This would allow you to submit the receipt and you'd get reimbursed that $75.
The benefit of enrolling is that your medical expenses are then not taxed by the IRS, so this lowers your taxable income. You can decide how much you want to put into it per year and that amount is take from your paycheck
pretax. (At my job, we are paid every other week so that's 26 paychecks per year. So my total amount is divided by 26 and that is how much is deducted from my pay.)
We started with $600 the first year, afraid that we might not ever reach that much in expenses. We plowed right through it by May of that year. The right amount to choose really varies from person to person and how much you spend per year in copays, etc. Things that people often don't consider medical care expenses that are submittable are eyeglass, rx sunglasses, contact lenses and their cleaning/solutions, sunscreen, fluoride rinse, etc.
I know people who don't like it because $ is deducted from their paycheck and that gets them twisted but the alternative is paying more to the IRS, which I dislike even more so I do it.
JMHO
. But knowing these are coming and even starting off with $20 per pay check for each category, you will feel amazing when these bills come and you have the money set aside. It also takes some stress away. Either way, find what works for you and that you can stick with.
