Savings, schmavings

So.  It’s that time of year again (fall) when my husband and I recommit ourselves to our financial goals by eating at home, saving money, and paying down debt.  For some reason we fall off the wagon over the holidays (okay, not “for some reason,” obviously) and then spend spring saving up for a summer vacation, but here we are again, recommitted.

It’s our thing.

This year we’re better off than last year in some ways (only debts are cars and houses, I got a $15k raise in February, we’re happy with our vehicles) and worse in others (my husband’s job is dying a slow death, we’re needing to add “tuition” to our savings plans) but we generally feel pretty good about our money situation.

Last week I asked us a simple question: how much money would we need to have in order to not worry about money?  Rather than answer in terms of income, as we might have in years past, we both answered in terms of savings.  Me: $10k as a starting point.  Him: 3 – 6 months’ expenses.

Our goals look like this (in no particular order):

  • $10k e-fund: $10,000 (yea, duh)
  • Pay off cars: $8000
  • Big anniversary vacation: $5000
  • Travel (smaller trips): $2000
  • Tuition: $2000
  • Baby fund (thinking ahead): ??
  • Fun money: ??
  • Buffer savings: ??

Lots of goals.  Limited funds to allocate.  We’re therefore grappling with one question: do we do one thing at a time (and throw all our money towards that one goal until it’s tackled) or spread our savings across many things?

We’ve had good experiences with focusing on one goal at a time (a la Dave Ramsey’s baby steps) but then we fall off the wagon when we do or need anything else.  Not good.

On the other hand, I lack the patience to see a bunch of balances increase (or decrease) incrementally over time.  Which reminds me: this year’s personal goals need to include “cultivate patience.”  But along with cultivating patience, allocating money to different accounts automatically means we can save on auto-pilot.  This is a good thing.  The less I think about money, the more successful I am at living in abundance rather than scarcity.

So, how do you save?  Many accounts getting bigger in increments or one thing at a time?  How many savings accounts do you have? (We have three – four, which drives my husband nuts… but our local banks won’t let me subdivide savings so I use ING Direct, too.)  What percentage of your income goes to savings v. debt repayment v. fun money?  I’m particularly interested in fun money, because I think we give ourselves much less than most people – and then we buy something expensive and fall off the wagon.

EXTRA CREDIT: Other Helpful Money Posts Across the Internets:

Emergency funds: Pantomime Papers

Living Within Your Means: Nodakademic

Hidden Costs to Home Ownership: FortyTwentyFour

Why Rent When You Can Buy? US Meets UK

Affordable Groceries: That Wife

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8 thoughts on “Savings, schmavings

  1. We have three. One of them, has no money in it (just came free with hubby’s checking). One is at my bank, and I put a small amount each month in there for ‘small emergencies’ or frivolities [such as buying someone a wedding gift, or paying for a car repair, stuff like that]. Then the mac daddy savings is shared by us, and we both contribute to it. We use this savings for anything from paying for big trips, to paying off debt. More organization would be good, but we’re not there yet.

  2. Does ING Direct allow subdivision of savings accounts? If so, I can’t figure out how to do it.

    We need to start thinking about money a lot more. We have goals, but we have no plans on how to reach them. Also, we just fell into some new expenses, in that I recently found out my poor husband had not been to the dentist in 20 years. All things considered, he is in decent shape, but he will have four teeth surgically extracted this month. We have insurance but it won’t cover everything.

  3. We have 4 savings accounts as well – two of which go unused which I find annoying but we might want someday so we keep them. One holds our little 1k emergency fund and the other is where our ‘keep the change’ savings are dumped. We don’t touch either of those accounts, and all our ‘extra’ money each month rolls over to pay off more debt. When we’re done with that we’ll probably be allocating all of our funds that previously went to debt into the emergency fund, then once that is up to about 3 months savings, we’ll move on to other savings.
    I really like accomplishing one goal at a time, especially now while we’re paying off debt. I think though, that when we’re finished getting our emergency fund together we’ll probably just start saving for everything else together as a lump. A new car, house down payment, baby fund, etc. can all go into one big savings account and whenever we need to take one of those steps, we’ll have a good start. For small variable expenses and fun stuff, we have those averaged out and built into the budget with a cash cushion in our checking account to spare. And plans for, say Christmas, are to budget a reasonable amount and just pay that much less to our debts for the month. Really though, we’re so focused on getting rid of this credit card weight that saving part of our income each month for different things isn’t even on the radar yet. It will be really nice when it is though.

  4. We have a checking account with a substantial amount (where our checks our directly deposited) from which we pay off credit cards (every month), school-related expenses, food, rent, utilities etc– the day to day. We have another savings account with the highest interest rate we could find for our emergency fund– we never touch it and will only touch it if something like a job loss or illness happens–which would allow us to live at our current level for about 9 months. When we got married, we put everything into this emergency fund until it was at a level we were comfortable with. Now we have one other savings account which doesn’t have a specific goal attached to it at the moment but might be called the down-payment fund.

    I don’t know how much percentage-wise we allocate for fun, maybe 15-20%? but I’d say that’s where almost all of my discretionary spending goes– I’m not really a stuff person so I don’t usually buy clothes, house stuff, electronics, etc., and we own one 13 year old car, but I love experiential spending– out to eat, drinks with friends, travel, theatre, movies, museums etc. etc.– that is absolutely where my money goes. The problem with experiential spending is that you have nothing to show for it afterwords but basically it just comes down to what gives you joy.

  5. My biggest personal finance rule is: pay yourself first. Based on that, my husband and I have a portion of our paycheck deposited to our savings accounts on payday. The rest of our money either goes into our checking account for bills or fun. Since we take care of our savings up front I don’t track where that money goes much beyond making sure we don’t spend more than we have in the checking account. Our cash flow roughly breaks down this way: 50% of our income goes to monthly bills, groceries, etc, 30% of our income goes to savings, and the remaining 20% goes to fun. The only debt we have is our mortgage, and I count that in the 50% that goes towards monthly expenses.

    Our savings is broken down into three different pots: retirement (10%), long term (10%), and short term (10%). The retirement savings is my 401k and his IRA. The long term and short term savings are internet based savings accounts. (One at ING and one at Everbank.) The long term savings is our emergency fund right now, but since we’ve reached our e-fund goal (6 months of salary) we’ll probably start investing more and more of the long term savings money. The short term savings is for big expenses (e.g. vacations) and small emergencies (e.g. car repairs).

    I, too, get frustrated watching many accounts go up by small intervals, which is one of the reasons we have such broadly categorized accounts. I imagine that it might work to contribute to a few (or even one) broadly categorized savings accounts to watch the balance increase quickly and then use an excel spreadsheet to keep track of what each of those accounts is allocated for so you know how much you have to spend on each goal. This would allow you to set one goal at a time (get savings account to $X by this date) and also make saving on autopilot realistic.

    Finally, I can’t recommend embracing the pay yourself first concept enough. Having your direct deposit set up to send a percentage of your check into savings on pay day is huge. I know that I will spend money if I have it, and I won’t spend it if it’s not there. So once I started direct depositing a portion of each paycheck into my savings accounts, I stopped spending as much and started watching my savings grow. This was particularly nice because it meant that I didn’t have to worry over budgets every month. I hate budgeting enough that the mere thought of it makes me want to forget the concept of money ever existed, so knowing that I was covered savings and expense wise made me relax. And being relaxed made it easier for me to get more involved with my own money.

  6. We curently have 2 savings accoutns and will probably open at least one more. Someone told me about Smarty Pig where you can open one account but subdivide it into multiple accounts. I haven’t tried it though.

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