My Yearly Savings Plan
March 13, 2010 10 Comments
There are two things that I started for myself that I’m SO GLAD that I have.
However, the second thing I have I find to be FAR more useful. And that is my yearly savings account.
When I sat down and thought about what things caused me to use the credit card in the past, it was never HUGE events like “OMG I NEED $1,000 OR THE MAFIA IS GOING TO KILL ME!!!” In fact, in my adult life, I’ve never had an expense at any time that needed more than $1000 available to me quickly – and typically these are car related expenses.
The things that caused me to use the credit card were the $100 here or $75 there expenses that were totally predictable. I mean, I know that I have to pay my car registration every year. I know that Christmas is coming. I know that I will need some sort of fund for traveling each year. These aren’t “surprise” occurrences, however, when they happen all in the same month or you’re not prepared for them – well, then they become huge, major ordeals.
So I sat down and made a list of everything that comes yearly or semi-yearly for me and approximately how much (approx) it costs me each year:
- Christmas – $480
- Car repairs – $480
- Health copays and expenses – $240
- Car registration – $120
- Pet vaccinations – $240
- Vacations – $240 (this is very low ball, obviously, when I make more money this value will go up)
- Professional Membership – $60
- Haircuts/beautify – $180
All of these things together cost me $2,280/year. Now think about that. Do you have an extra $2,000 sitting around in your checking account for when these expenses happen? Most of us do not.
With a list in mind of all I spend money on yearly, like clock work, I then took the total for each of them and divided by 12. This (for me) is $190/month.
So each month, when my paycheck comes, $33 is put into my E-fund (since it is now “fully funded” until I get my debt payed off) and $190 is put into my “Yearly Savings” account – which is just a simple ING savings account. (Before my E-fund was fully funded I put $100 into my E-fund and $140 into my yearly savings.)
Then in Excel, I keep track of exact how much I get each month and how much I spend from the different “funds” I’m saving towards.
The very act of having this yearly savings account has kept me out of so much trouble. For instance, I’ve had to pay out $75 in copays this week. In ONE week. Well, I give myself a budget of $150/week for food, gas, doggy daycare and entertainment. So having to spend $75 in one week really kills the budget quick. That is half my weekly budget GONE.
However, having a yearly savings account gives me peace of mind that I don’t have to worry about these expenses. I’ve already paid for them, little by little, each month.
And what if I go over? For instance, what if I save $240 for a vacation and I need to spend $300?
Well that is simple, then the difference comes out of my every day spending account. However, $60 to pay out of pocket is a lot less impactful than having to pay $300 I’d say!
So, if you don’t already have a yearly savings account set up, I would encourage you to do so. Over the past 6 months, having this one has kept me out of a LOT of trouble, and I bet it could do the same for you!