How important is our mindset? It turns out, mindset impacts almost every aspect of our lives, from finance to education to equality to corporate culture (and beyond). As a strong believer in the power of mindset, I’m a huge fan of Carol Dweck and her work. Dweck is a professor of psychology at Stanford and a leading researcher in the field of motivation. She’s also the best-selling author of Mindset: The New Psychology of Success.

In her book, Dweck identifies two core mindsets:

• A fixed mindset, the belief that one’s abilities were carved in stone and predetermined at birth.

• A growth mindset, the belief that one’s skills and qualities could be cultivated through effort and perseverance.

A lot of times we’re doing so many things right in our personal finances, but we’re still not seeing the progress we want. We’ve taken the time to set up a weekly or monthly budget (we may even be using a great budgeting spreadsheet). Everything runs smoothly for a little while, until a larger irregular expense comes up. 

I’ve found that sinking funds are an easy and straightforward solution to getting rid of the ups and downs and money stress that come with these types of expenses. 

There are expenses in life we can’t plan for and that’s why we have a rainy-day fund. But there are also many expenses that we can plan for and just don’t. The holidays are a perfect example. They come around every year and yet almost half of us get stressed out about money around the holidays. We don’t set up or stick with a holiday budget.

We spend more than we plan or expect. Cash ends up feeling tight, we have to pull money from savings, or we put the extra expenses on a credit card that we have to deal with later. It takes away from this joyful time and ends up causing us a lot of stress.