How do you manage paying your bills, saving for the future and spending for fun? Multiple savings accounts! I LOVE splitting up my savings categories so I can see how close I am to reaching my goals. Here I break down the accounts I have and why I’m such a fan. Enjoy!
Hey, this is Lindsay with Mind Money Balance and today I'm going to talk about why I love having multiple savings accounts.
It's very important psychologically to be able to see exactly where your money is when saving up for something. I'll go over the different types of savings accounts I like to have during this video.
When I say multiple savings accounts, I’m not talking about having a certain amount of money in bank one and a certain amount of money in bank two and so on and so forth. I'm talking about having all of your money in bank one but labeling the different savings accounts with different names. If your bank doesn’t offer this, it’s probably time to start looking for a new bank. There are plenty of options online, I really like bankrate.com and NerdWallet. Those are two great websites that can help you find banks that provide for your needs.
Let’s get down to the different accounts I like to have:
The first bucket of money is your emergency fund. This should be money that is only there, for exactly what it sounds like, in the case of an emergency. If something should happen to you or to your home that was unexpected if an emergency surgery comes for a pet or something like that. So that’s number one, getting an emergency fund.
The other account I like is an irregular expenses account. For things that come up throughout the year but they aren’t expenses that come up every single month. Things like car insurance might go into this account would be things like car maintenance, insurance premiums, things that are happening occasionally. Set some money aside in an irregular expenses account.
The next two are the fun ones. They are your life goals account and your fun money account. Your life goals account is money you're putting towards something that you are saving up for that might be off in the future. Maybe it’s time for a new couch. Maybe you’re looking to move and you need to save up first and last month's rent. That would be your goal account.
The last one is your fun money or your treat yourself account. This is really important for all of us to have because if all we're doing is kind of stocking money away and not using or enjoying it, then we can get fatigued when it comes to saving money for bigger things in our lives. This is your treat yourself or your fun money account, whatever you want to call it. This is the account that you can tap into for those things at that can be your kind of mini-indulgences or your mini-splurges.
I’ll walk through an example right now so you can kind of see what I mean when I talk about a treat yourself account. Let's say you are two person household so it's you and your partner. For you guys, there are a few things that are really important to save for throughout the year. Let’s say twice a year, you guys like doing a spa day and get a massage. That's two hundred bucks each time so now we've got $400 that we want to set aside. Now let's say you really enjoy having a date night carved out every single month. And that date night could vary. It could be going out to dinner to going go-karting but you want to set aside $100 each month so you can always have your date night. $100 a month times 12 (for twelve months of the year) and then you have $1,200. So you're are saving $1,200 in your fun money account in addition to the $400 for the spa. Finally, you like to have a little bit of pocket change for those things that come up. Say you are out exploring and there's a really cute travel mug or maybe you're out to dinner and you've hit your hundred dollar limit but there's a really yummy dessert on the menu. This is your extra cushion in your account. You want to save $50 a month towards those kinds of fun one-off purchases. Multiplying the $50 by 12, you have $600 a year.
Adding up the $400 the $1,200 and the $600 so that comes out to $2,200 per year that you are looking to put into your fun money account. It can kind of sound daunting but we are using a two-partner household so if we divide that by 12 were around $183; let’s just call it $184 so it's a little easier. That $184 you have so that breaks down to $46 per week or $23 per week per person. So once you put it like that you're putting aside a little more than $20 each week into this fun money account so that way when you do go to out you can spend somewhat freely. Why? Because you’ve set aside money for exactly that.
You’ve got your emergency fund, irregular expenses, big goals, and your fun money accounts along with a checking account. The checking is where your paycheck goes.I like to have automatic transfers set up so you can put money into the four accounts we already talked about once or twice a month.
If you have questions about what to do with your particular money situation, or this seems overwhelming, or you just want a little extra help go ahead and schedule an appointment with me. You can set up an appointment at mindmoneybalance.com. I'm available to see anyone in Michigan face-to-face and online across the country.