You might manage to save a few extra bucks each month, but what do you do with it? Wouldn’t it be great if you could create savings pockets for every goal of yous? That would probably help as we somehow manage to spend any money we have unless it’s ring-fenced or set aside for a specific purpose. We need to put measures in place to protect our money from ourselves. LOL. It’s hard staying in control.
Use one account
So let’s think about this logically… the first issue is where to save the money. In order to keep our admin as simple as possible, don’t open a new bank account or investment account. Rather have a look at what you already have, and identify the account that offers the highest interest rate along with competitive monthly fees. It’s also important to consider how quickly you can access your funds. Imagine having a large emergency savings fund which you cannot access without giving 30 days notice; that could be a disaster!
It is generally best to build an emergency fund separate to your general savings account though. This does depend on whether you spend money on the spur of the moment and are easily tempted. You sure can start with a single account and change things later. Find what works for you.
You may consider using an investment vehicle, a fixed deposit or simply an interest bearing account. Consider when you may need to access the money. Are your savings goals short or long term? Do you even know what you are saving for? If not, start thinking abut that.
Generally speaking, for short-term savings goals a bank account or money market account is probably the best, but do your homework.
Create savings pockets in a spreadsheet
This is where people often fail as they do not keep track of the money they are saving. This is really easy and should not take more than 15 minutes each month (if that!).
Create a spreadsheet where you specify the amount of money in your savings account that is allocated to various goals. You can simply have a total amount as shown, or you can create details of the amount you save each month (consider whether you will continue updating it each month; is it worth the effort?)
This may seem like extra admin that will complicate your life but it really is not! The process is simple:-
- During the month (at any time) transfer money into your savings account.
- At the end of each month, update the account balance in your spreadsheet and reallocate money to the various goals ensuring that it all balances at the end.
- When you need money, look at what is available and decide accordingly.
You can now know how much money is available to spend and how much is allocated towards goals. It’s almost silly how obvious and easy this is. Now it’s up to you to do it!