This week I’m participating Women’s Money Week. The aim of the week is to create a dialogue about the financial issues specific to women and coincides with International Women’s Day. Each day there is a topic for participants to write about on their website. Today’s topics is about Saving Money.
I’ve written in the past about how we create a savings plan using excel, and how we save for multiple goals, but I thought today I would share exactly what we are saving towards at the moment to give you an idea of what saving for multiple goals looks like in real life.
Our savings plan is a work in progress; our goals change as our needs (and wants) are met and we develop new ones (for instance, we’re saving for a second baby car seat at the moment, obviously not something we save for all the time).
Also, each year I save for more and more specific things. For instance, I wrote the other week how it never occurred to me to save for the replacement costs of household goods like linen and furniture – we now put a little aside each week to cover those future expenses when they crop up.
The whole point of doing this is to keep us out of debt and reduce the pain of paying large bills when they crop up. Putting aside a few dollars each week towards a bill is much easier than having to suddenly come up with several hundred dollars when a bill falls due.
And I admit that in some instances we only put $2 aside for certain expenses (like dental for the kids – my alternative to getting private health insurance to cover possible teenage braces etc.) because that’s all we can reasonably put aside at the moment. But $2 adds up over the course of a year or years and makes life easier down the track (and we can always increase this amount in the future, re-evaluate our savings priorities or spend it on something else if it turns out the kids have teeth straight teeth). Of course, you have to be disciplined not to spend this money on something else in the meantime.
To make this process as easy as possible, I automate it. I’ve set up an automatic transfer into our savings accounts that is deducted each pay (as described here) and all I have to do is update my spreadsheet (which really is optional; the main thing is to actually save, but I enjoy tracking our savings and it does help to keep track of whether you’ve reached your goals / can afford to pay the bills).
Our financial strategy at the moment is similar to zero based budgeting, however we don’t quite budget every single dollar, I do leave some money ‘un-budgeted’ for extra grocery expenses or just splurges, outings or small things that can pop up. And if, at the end of the fortnight that money is still left over, then I might put it towards savings.
While I use excel to track our budget and multiple savings goals, there are many ways to do this: you could use a bank that allows you open several savings accounts without incurring extra bank fees (and therefore eliminate the need for data entry yourself – just automate and forget); you can track your savings amounts on paper; or use one of the various electronic budgeting software options available (more on these in the near future).
So onto our list of savings. This is what we put money aside for every pay day. As I mentioned, in some cases it’s only a dollar or two, but a little is better than nothing (in the free eBook available I go into how I calculate how much we need to put aside to cover regular bills).
|Household goods||Medical / prescription meds|
|Household furniture||Vet / pet needs|
|Household maintenance||Baby needs|
|Home and contents insurance||Clothing|
|Fun money / outings / misc.|
|Phone / net bundle||Holidays / Travel|
|Electricity||Travel home to mum’s place|
|Water and sewerage||Big / Specific purchases|
|Body corporate fees||Window screens|
|Car repairs / maintenance||Kids|
|Future medical / dental|
Creating a specific savings plan is another way to manage your money and it means you can pay for future expenses with cash and without stress. You don’t need to track every expenses like I do, you can just put aside a fixed amount each pay day to cover everything. However, getting specific means that you can be certain that you’ve saved enough for each expenses or it can show you how much more you will need to save.
What things do you save for? Can you see anything that I should add?
This post is part of Women’s Money Week 2012. For more posts about saving money see the Saving and Investing Roundup.