Sinking funds: the trick that makes Dashain and Tihar spending painless

Every January in Nepal, two things happen at once. People who spent comfortably on Dashain and Tihar quietly tighten everything for two months. Fewer eat-outs, postponed bike services, "maybe next month" on a school admission deposit. They tell themselves, every year, that next year they'll plan ahead.

The reason it doesn't happen isn't willpower. The budget is shaped wrong. A regular monthly budget makes a festival look like a sudden rule-breaker, a one-time cost that smashes through every category for a month. It isn't. Dashain is on the calendar before you wake up on January 1st. The math has been knowable for centuries.

A sinking fund is the small re-shaping of the budget that makes that knowable cost stop hurting. Below: why it works, where to put one in Nepal, and the four categories where it earns its keep.

Why festivals break ordinary budgets

Festival spending in Nepal is enormous and concentrated. By common estimates, Dashain alone accounts for tens of billions of rupees in nationwide spending each year, and a significant share of annual retail trade happens in the Dashain–Tihar window. That isn't a quirk. It's the shape of the year.

Earning evenly each month and spending lumpily is a cash-flow problem, not an income problem. Two ways to solve it:

1. Borrow against the future. Credit card, loan from family, breaking an FD. Works once. Creates the cycle that makes January feel like punishment.
2. Pre-fund the lump. Take a piece of every month's income and pre-load the festival expense before it arrives. The sinking fund.

Under Section 37 of the Labor Act 2074, every salaried employee is entitled to one month's basic salary as festival allowance, which does some of this work for you. Basic salary is rarely the same as total festival spend, though, especially once travel home, gifts to extended family, and new clothes for everyone are added in. The allowance covers part of the budget, and it lands smaller than the headline because the whole bonus is taxable — the mechanics are in how the Dashain bonus is taxed. The sinking fund covers the rest.

Sinking fund vs. emergency fund: keep them apart

A common mistake is using the emergency fund for things that aren't emergencies. Dashain on the 10th day of Ashwin is not an emergency. A flat tyre on the way home is.

The clean rule:

• If you can write the month and rough amount on a calendar a year out → sinking fund.
• If it's sudden, involuntary, and you couldn't plan for it → emergency fund.

Mixing the two is the single most common reason emergency funds get drained. They get raided for festivals, weddings, and birthdays, leaving nothing for the actual hospital bill in February.

The math, in one paragraph

Pick the target. Divide by the number of months until you need it. Save that much, every month, in a separate place. Done.

For Dashain, with a target of रू 24,000 and 12 months until the next Dashain:

रू 24,000 ÷ 12 = रू 2,000 / month

Starting mid-cycle is harsher. Say it's May and Dashain is in October: 5 months left, so the same target becomes रू 4,800/month. Better to split this year's shortfall (most of it from the festival allowance plus some monthly savings) and start the next cycle clean from November onward. The first sinking fund built is always the hardest. Subsequent years are smooth.

The four sinking funds most households actually need

Build them in this order. Trying to spin up all four at once is how the whole project gets abandoned.

1. The festival cluster

The single highest-yield sinking fund for almost every Nepali household.

Lump every festival you actually celebrate (Dashain, Tihar, Teej, Holi, Lhosar, Chhath, Christmas) into one pot. One category is easier to fund and reach into than five.

To set the target, look at last year. Spending on:

• Clothes (new outfits for self, partner, kids)?
• Gifts (cash and goods)?
• Food and home preparations?
• Travel home (bus tickets, fuel, gifts brought along)?
• Eating out and outings during the holidays?

Add it up. Round up 10% for inflation. That's the target. Divide by 12 for the monthly contribution.

A working profile:

These are honest middle-of-the-road ranges, not aspirational ones. Adjust based on what last year actually cost.

2. The wedding and invitation fund

Nepal's wedding season runs Mangsir to Falgun, with a smaller cluster around Jestha, and is the second-largest festival-shaped expense for most households. The cost isn't one wedding. It's the cumulative cost of every wedding and brataband you're invited to in a season, plus your contribution to family weddings (clothes, gifts, sometimes travel). If it is your own wedding you are saving toward, the tiered wedding-budget breakdown is a better target than a season of invitations.

Four weddings last year at रू 5,000 each (cash gift + clothes + transport) totals रू 20,000. Divide by 12 = रू 1,700/month. The fund means December doesn't become "the month I went to four weddings and ate biscuits at home for two weeks."

3. The annual insurance fund

Health insurance, vehicle insurance, and life-insurance premiums tend to land in 1–2 lump payments a year. Total premiums for a typical urban household sit somewhere between रू 10,000 and रू 50,000/year.

Take the total. Divide by 12. Save it monthly into the same account it'll be paid from. When the premium notice arrives, the cash is already there.

The cost of failure here is the highest of the four. Lapsed insurance because the premium "came at a bad month" can wipe out years of premiums in one uncovered event.

4. Vehicle service and repair fund

Owning a bike or car means an annual service plus 1–2 repairs is a known yearly expense, even when the exact months are unpredictable.

Rough monthly contributions:

• Scooter / bike: रू 500 – 1,000/month → covers servicing, tyre changes, occasional repairs.
• Small car: रू 1,500 – 3,000/month → covers servicing, occasional larger repairs, insurance separate.

This fund overlaps with what an emergency fund could cover, but separating it has a behavioural advantage. The emergency fund stays full and feels untouchable, while the vehicle fund is allowed to flex up and down.

Where to actually keep sinking fund money

Same logic as the emergency fund with one relaxation: yield can matter a little, because some sinking funds have a known maturity date.

The single highest-impact behavioural move is opening the sinking fund account at a different bank from your salary account. Transferring it back to spend has friction small enough not to block legitimate use, but large enough to stop raiding it for a Saturday outing in March.

A working schedule for someone starting from zero

Suppose your monthly take-home is रू 50,000 and you've been saving the recommended ~20%, so रू 10,000, into a single "savings" account that does everything.

Once your 3-month emergency fund floor is covered, split that रू 10,000:

• रू 5,000 → continues to emergency fund until 6-month target reached
• रू 2,500 → festival cluster sinking fund
• रू 1,500 → wedding/invitation fund (if applicable) or annual insurance fund
• रू 1,000 → vehicle service fund (if applicable)

Once the emergency fund hits 6 months, that रू 5,000 is freed up. Redirect it to a goal-dated investment or a larger sinking fund. The point isn't to maximise sinking funds forever. The point is to fund the lumpy, known costs and free up the rest for goals.

What "painless Dashain" actually feels like

The first year, the change is small. The festival allowance plus three or four months of contributions covers most of the spend; the rest still feels tight. The second year is where the work pays off. You arrive at Tihar with the target already in the account, and the entire holiday goes by without a single "can we afford this?" calculation.

By the third year, new sinking funds start appearing: a phone replacement fund, a yearly travel fund, a kid's school admissions fund. The technique scales without becoming a job.

Not glamorous. No compounding magic, no investment thesis, no story to tell at a dinner. Just the quiet system that keeps January from being awful.

What you actually need to know

Three lines:

1. Festivals are not emergencies. They're on the calendar. Pre-fund them.
2. One pot per category, not one pot for everything. Festival, wedding, insurance, vehicle: separate budgets, same account is fine.
3. The first year is the hardest. Don't try to fully fund five categories on day one. Start the festival cluster, get to a clean cycle, then add the next.

If you do nothing else after reading this, open a second savings account this week, set up a रू 2,000 monthly transfer into it labelled Dashain 2027, and forget about it. Next October will feel different.

Got a household profile or a festival worth covering next? Email parjanya57@gmail.com.