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Tip 38 – Sinking fund – Even buildings have a life span

Every fixed asset will have an economic lifespan and a design life span. Your sinking fund is not just about maintenance, it’s also for capital replacement. When you receive your new sinking fund report always check the underlying assumptions; for example if you are painting a steel pergola structure once every 3-5 years, is that going to be more economical than replacing the structure with powder coated aluminium?