If you have multiple savings goals, you need to think about where your money is going for each one. How are you separating your savings? You need to have multiple savings accounts.
We had different savings accounts for all the different financial goals we have in mind. There’s one strictly for tax. 30% of everything I earn goes into that account ready for tax. Anything that is a business expense is paid for from that account to keep everything separated.
Then we have a savings account for a downpayment on a house, one for Christmas and birthday savings, and one for emergencies. There’s also one for holidays and other short-term savings goals. Having everything separated is essential for us.
We know how much money we have
Before we had the separate accounts, I’d always question what the money was for. Was the money in the account for the house, for a holiday, or could it be used in an emergency. It made tracking for the individual savings needs impossible. What had I taken the money out for?
It was when I realized that I just couldn’t keep track of the house purchase goal that I knew we needed individual accounts. I always thought extra accounts would be difficult to manage, but it’s turned out really easy. I can say exactly how much is going into each account.
Now it’s possible not just to see the amount we have at a glance, but to make sure I’m on track for a goal. We need to save X amount per month for our house if we want to get a mortgage by a certain time frame. I now know how much needs to be put into the account to ensure that happens. Am I behind? I know how much extra needs to go in with ease.
I know how much we’re spending at Christmas and birthdays. There’s a clear amount available for emergencies. Then there’s even a holiday account for whenever we’re able to travel safely again.
Multiple accounts don’t need to be confusing. Make notes in your own budgets. Keep track of everything in spreadsheets or through something like Mint. You’ll find you save more and stay on track with your savings goals when you have the individual accounts for everything.
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Stay on top of your own savings goals
If you don’t have some savings goals, I highly recommend you set them now. I set ours with Mint. It’s an easy-to-use budgeting software that allows me to quickly set a goal or two for the future. I connect savings accounts to the goals, so it’s easy to see how far off the goal we are or if we’re on track.
You can do it all by hand or by a spreadsheet. The choice is up to you. What you want to do is make sure you have the savings goals in mind.
Having an emergency savings account is always important. You just never know when something will happen. A friend recently told me her house had a flood. Uh oh! Our battery died on the car in the winter. The emergency savings has been beneficial to make sure unexpected costs don’t put us into debt.
Then I have the tax savings account. This is essential for tax time. If you’re a WAHM, you need that account set up. I put in 30% of my income, which is more than the tax I’ve paid in the past. However, I have a feeling my income will go into the next tax bracket this year and I want to be ready for that.
Your savings should become part of your regular budget. Think of it like paying yourself. Before you spend money on luxuries, you need to make sure your goals are in order first.
Look out for the best rates
Savings accounts don’t have great interest rates right now. If you’re financially savvy, you may want to consider investments instead. It’s something we’re looking into, but not ready to take the risk on just yet. It’s okay if you’re just not ready for that right now.
When it comes to savings accounts, don’t just go with one connected to your current bank. Look for the best savings accounts available. You want ones with the best interest rates.
Some of our accounts are locked for a year to get the best rates. This is the case for our daughters’ college savings accounts and for other long-term accounts. Those where we don’t know if we’ll need the money, like the emergency fund, are unlocked, so we can take money out of them without penalty. It’s going to depend on what’s right for you.
Consider an automatic savings account
One of my favorite accounts is an automatic one. Every now and then, I’ll get an alert from my bank account to say that there’s been a deposit. It’s never more than $50 and it’s only when the bank account notes that there is enough money to grab from the main account to drop into the savings account. It helps with the short term savings goals, like a rainy day fund.
These accounts can be scary. How do you know the account is smart enough to take the right amount of money out? What if it takes too much out before a bill? This is something I worried about at first, but I decided it was worth the chance of setting it up. I could turn it off right away if I wanted.
At first, it was $50 per day, every day. Slowly, it settled down. Now it’s more like $200 per month that’s moved in $25 to $40 increments now and then. I usually find the money moves around payday.
How do you keep track of your savings goals? Share your thoughts in the comments below.