Sunday, November 6, 2011

Multiple Savings Accounts are the Way to Go!

I hate those pesky bills that come quarterly, semi-annually, annually...They are so easy to forget to factor into our monthly budget because they're irregular.  Though not unexpected. Those companies screw up all the time, charging us this, messing up that, but they never seem to forget to send us those darn bills!

For the past few years (especially since being self-employed and having to save for quarterly estimated taxes) we have been keeping a separate "Annual Expenditures" account for those annoying bills.  Call it whatever you want-"Irregular Expenses", "Stupid Large Bills", etc--but this is the way to save and pay for those bills. In our account, we save to cover property taxes, my estimated taxes, car insurance, car tags and inspections, homeowners association dues, life insurance, a yearly vet appointment, yearly dental get the picture.

Gather up your bills and add up the amounts of all those stupid fees, rounding up a bit to be sure, to estimate an annual total.  So, if you pay your car insurance every 6 months (hopefully you do--it's a bit cheaper to do it that way) you need to double that amount to get the yearly total.  Do that for everything--you can even include birthday gifts in this.  Take that total, divide by 12, and you come up with the amount you should be saving every month to account for those bills.

You can modify this, too.  Say, for example, you are a teacher and your salary is reduced during the 3 summer months.  Divide the annual amount by 9 months instead of 12, save that amount only during the 9 months of the school year, and then you don't have to worry about saving so much when your income is lower during the summer months.  You could also divide it by 11 to allow you to leave out December (when you're buying the bulk of your gifts).

Speaking of gifts, you should also have a Holiday savings account, set up the same way.  Make a budget, including gifts, party expenses, holiday outfits, travel expenses, etc and divide it so you can pro-rate that cost and save over the course of the year.  Trust me--using cash for buying gifts keeps you from overspending, and you don't have to deal with the anxiety of the credit card bill come January.  Plus you realize the value of what you're spending because you worked so hard to save it!

We have a ton of savings accounts, some we deposit into monthly, some that stay put and only get love once in a while.  But that's okay because it makes it so easy to track our goals.

Here they are:
1) Emergency Fund
2) Annual Expenditures
3) Planned Spending (for vacations, furniture, or other larger purchases)
4) Education Savings
5) Car Savings
6) Hubby Fun Money
7) My Fun Money
8) Baby Savings (for planned future child-supplies, gear, medical expenses)
9) Holiday Savings

Crazy, huh?  But it works really well for us. You should try it.

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