My Yearly Savings Plan

There are two things that I started for myself that I’m SO GLAD that I have.

#1 is a no brainer: my emergency fund. There rests around $1,000-$1,400 in it at any given time during the month. It took a year to get to this level and has saved me from a few minor disasters.

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.

Click to make bigger

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!


10 Responses to My Yearly Savings Plan

  1. While I’ve thought about what certain things cost me over the space of a year, I’ve never thought about adding them up and finding the monthly cost, then saving for it. Genius!

    Also, I miss the days of having $1000-$2000 saved for emergencies and feeling secure. With a home, the costs of “things that could go wrong” are much, much more. Like OMG, what if the furnace goes? Or a tree crashes through the roof? I know that’s partially what insurance is for, but it’s scary to think about.

  2. SP says:

    I do almost exactly that! But i also lump in midterm savings that will eventually be spent (ie, wedding fund).

    It drove me crazy to have “unbudgeted” expenses, and you are right — they are totally predictable!

  3. eemusings says:

    I do a pretty similar thing, but not as comprehensively. Mine covers all kinds of utilities, car expenses, insurance. I have a separate travel fund. I don’t have pets and don’t spend much on clothing/beauty – but may have to revisit that, because T doesn’t have a large wardrobe but he does wear through his clothes really fast and they’re not cheap to replace!

  4. I sorta have something like that in place but not really. I have a “slush” fund that I put my spending money into. It can be for a vacation or for little things. I find that way I know what’s going on and I feel more control over it. (I’m neurotic this way, haha.)

  5. jolie says:

    2009 was the first year I had my annual expenses planned out (mostly) and money put aside for them. It was such relief to have that list of what bills were coming, how much I need to set aside per month to make it happen, and best yet, the money to pay them when they come. Your spreadsheet for it is fantastic. I may steal a few ideas 🙂 Thankss

  6. Looks good, I am doing that now. I have my emergency fund/TFSA which serves doubly right now as a planned spending and emergency fund (if my car breaks down), and I have a Christmas/gift fund and travel fund. This is my first year doing this but it’s already very useful!

  7. TeacHer says:

    I have a similar way of handling annual expenses, but I save for them in a different way. Since I have extra income streams throughout the year, I put money into my ING accounts so that when these predictable (but not monthly) expenses arise, there’s money to cover them. For example, I get an “extra” paycheck two months out of the year, and my next one will go to beefing up my Car Repair Fund and putting aside the money I’ll need for Christmas 2010.

  8. Ronnie says:

    I’m like TeacHer. I have ING accounts set up for 3 areas: vacation, car, and medicine. Vacation encompasses Christmas. I put in $100/month for vacation, $150/month for car, which covers insurance, registration, oil changes and minor repairs, and $75/month for medicine, which covers co-pays and prescription deductibles and refills. I have an Electric Orange account, so when I need funds immediately I just transfer from one account to the EO account, which occurs immediately, and pay from there.

  9. Red says:

    Very nice! I like how you have your spreadsheet set up as well. I may have to look into this!

  10. Pingback: My Yearly Savings «

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