When people ask me how I manage everything that I do – full time corporate job with business travel, blog, managing a household with two little ones – I laugh. I do not do it all. I feel like I am failing at something 90% of the time. Hence the reason for this post. I need things in my life that just go on autopilot so I don’t have to even think about them.
Ten years ago, I came across a blog (please don’t ask me which one as I have no idea!) that was focused on saving money and organizing your finances. Being a newbie to this whole “finances” thing, I soaked it all up and immediately went about setting this system up for myself. The idea is to set up different savings accounts for different purposes. Back in the day, I did this through Ing Direct (now Capital One 360) which also allowed me to name my savings accounts for their purpose. I’ll share the ones I’m currently using so you get the idea:
- Emergency fund
- Home improvement
- Family photos
- Retirement extra
- HOA (Home Owner’s Association)
- College fund
- Car fund
At the beginning of each year, I calculate the total amounts I’ll need throughout the year for each of these categories. Gifts is a great example. I go through each month and note the birthdays, anniversaries, Mother’s Day, Father’s Day, Christmas, etc. gifts that I will likely give (or celebrations I will pay for) and the amounts I’m budgeting for them. Then, I average that out so that I am contributing the same money towards gifts every month. If I calculate that will be $1,200 for the year, I set up an automatic transfer $100 a month from my checking account into my “Gifts” savings account. When I buy the gifts, I transfer that money back to my checking account.
As you can see from the above, I do this for all kinds of things. I save money per month for oil changes and inevitable car repairs (one of our cars is a 2003 so this is not unexpected!) in our “Car Fund.” I save ahead of time for other large expenses like Vacations or Family Photos. Again, this is something that gets prioritized at the beginning of the year so that we’re saving all along to make these doable for ourselves when the time comes. For “Retirement extra,” that’s when I hit the max on my 401k and I wanted to put the deductions from my paycheck I would have gotten so I can put it somewhere else (hopefully with a higher interest rate than a regular savings account!).
So, why this system vs. a big savings account? For me, I need the visual reminder of where that money was going. If I saw just $5,000 in my savings account, I would probably forget about how these other expenses add up and I might even spend it on something frivolous. In thinking through my process, I think this could be done by setting up another spreadsheet or other system that showed you how you want to break out your overall savings account vs. having a ton of savings accounts like I do. For me, this process has helped me to pay for our honeymoon, my maternity leave, nursery for both girls, etc so I’m pretty happy with this process.
Hope this helps if you’re looking for a better system to keep track of your finances in 2016! Any tips for me? I’m always looking for better ways to keep things running smoothly!