Sinking funds: escrow envelopes for irregular bills

Some bills don't arrive every month: car insurance, property tax, birthday and holiday gifts, annual subscriptions (yes, even your budget app). We call them budget busters: easy to forget, and boy, do they hurt when they land all at once.

An escrow envelope (you might know it as a sinking fund) spreads each one out. You deposit a little every month, so the money is already waiting when the bill comes.

Setting one up

1. Add an escrow envelope for the bill, such as Car insurance.
2. Divide the yearly cost by twelve, and make that the monthly deposit. A $1,200 bill becomes $100 a month.
3. When the bill comes, log it as a transaction on that envelope. The money comes out of what you've saved there, not out of this month's income.

If you like to log the monthly deposit when you move the money, add it as a deposit on the envelope and leave the "Count it as … monthly deposit" box ticked. It won't be counted twice, and the deposit amount turns green.

Start with the one or two bills that surprise you most. You can add more any time.