Savings Buckets
What they are, and why they’ll revolutionize your spending
Most of our spending is predictable
You heard me. The $500 car repair? We could have predicted it! Cars need maintenance as they get older!
The $300 on a new winter coat that was “just this one time”? Totally predictable - we all buy clothes from time to time!
Your property tax bill? Happens every year!
We’re good at convincing ourselves that an expense was just a one time thing, an aberration from the norm. But here’s the thing: these aberrations happen all the time. If there’s one thing I’m sure of in life, it’s that there’s alllllways something. It might not be the same thing happening every month, but there will always be something happening outside of your normal, routine bills.
When we acknowledge that most spending is predictable, we can start planning for it
Our minds are trying to protect us, which is why it can be so hard to conceptualize our spending. Most of us are comfortable with what we think we spend — but once we realize how much we ACTUALLY spend, it can be a frightfully rude awakening. Especially when you consider all of those “just one time” expenses.
So…where to start with predicting spending?
Start by brainstorming everything that comes up in a year
This will be different for each of us, but here are some ideas:
Hitting your health insurance deductible
Car upkeep and repairs
Holiday spending
Vacations
Moving to a new apartment
Electronics upgrades
Yearly subscriptions and credit card fees
Taxes due when company stocks vest
And so on and so on! It’ll be different for each of us, but start with writing down everything you can think of. What expenses have come up for you in the last few months?
Calculate the yearly total of each expense
Once you have your list of occasional expenses, try to figure out how much you’re actually on each of these a year.
For extra credit, go back through your bank statements and see what you actually spent on each of these last year.
Figure out your monthly savings goal
Once you have the totals, divide that by 12 to see how much you need to save per month in each category.
If your health insurance deductible is $1,000, that means you should be saving $84/mo to have enough to meet the deductible every year.
It might be annoying to save this much every month — but compared to scrambling for $1,000 every January, it’s a no brainer.
Open a savings account with sub-accounts (also called “buckets”)
If you’ve been reading this closely, you might be like “wtf Kate you want me to open 15 different savings accounts?!”
Great question, but no I do not! I want you to open one savings account that lets you sub-divide it into multiple goals. It’s only one account, but has multiple buckets so you can be saving for home repairs, a new iPhone, and your next vacation all at the same time.
Tons of banks offer this, but my personal favorite is Ally. (I’m not an affiliate, this is just a personal rec!)
What next?
If you want help figuring out your savings buckets — what to save for, how much to save, how to fit it into you budget — let’s chat! Schedule a call with Beyond Money, and let’s get started!