Sunday, November 23, 2008

How my savings accounts work for me

When I save money, I have manyfold goals (and expenses) in mind. Let us break down my myriad of savings accounts to see how they forward my goals for the present and future.

Standard savings account
This is my first line of defense against rainy days, car repairs, unexpected medical or veterinary bills, and even the occasional overspending. I transfer $160 per pay period with a larger amount deposited when I have my extra paycheck month. I recently tapped into this account for medical deductibles and car repairs. This money is easily transferred to my checking account at my credit union, immediately accessible if needed. Less liquid CDs also hold a share of this money that can be used for emergencies. I am working on having CDs due every month so I have a larger pool to draw from without sacrificing other savings goals.

House account
This is where most small expenses associated with the house including gardening and landscaping are drawn from. Each pay check, I transfer $75 for these expenses. Typically, I can purchase small machines like a snow thrower, pay for small electrical jobs like installing a new outlet in the basement, but the window replacement expenses usually end up drawing from my standard savings account. Most of this money is spent at hardware stores with brief stops at a garden store or the thrift store. At various times, I have nearly depleted the account, but winter is generally quiet enough, a nice balance accumulates--just in time for spring!

Car savings
I would like to buy my next vehicle with cash if circumstances allow. However, if the time frame is shorter than I would like, I can at least put a good chunk of money toward a newer vehicle. Each paycheck donates $71.50 to the fund with any bonuses, rebates or other extra money adding to the account balance. In 15 months, I have saved over $2,700. My actual savings account only has a few hundred dollars in it as $2,000 is in two separate CDs with rates of 4.00% APY. I am gambling I will not need the money for at least a year, but having a bit more interest is worth it to me. After the above two accounts, the car savings has the highest priority.

By saving each paycheck, I allow myself to pay less money than a car payment for a future car. If I am forced to buy a car sooner than I would like, I will have to sacrifice money I was saving for emergencies, the house and future goals to make a car loan payment. The faster I can accumulate money for a newer car, the less likely I have to short change other savings goals.

Charity savings
I set aside a small amount every month for this account. Using this method, I can accumulate some funds and chose to send a larger amount to my charity of choice. Since the amount is so modest, my plans are to increase the donations to this funds so I can spread it around to more than one charity in a year. I focus on local charities like the food bank and make sure that I can help others that are not as lucky in their circumstances as I am.

Found money
I started this fund to see how small amounts of money can add up. Since opening the account, I have also added money from an internet subsidy from my employer. The small amounts of money did add up quite nicely and helped fund the purchase of my chest freezer. While the current balance is $256, I am hoping to purchase a computer with the money in a year or two. This means I will need to save more money and I may be more reluctant to part with my hard-saved dollars to purchase new technology as much as I admire it.

Farm account
This is ~4 year goal and lower priority than a new driving vehicle. Right now, this account has been funded by a portion of the last extra paycheck and some stray money leftover after funding the car account. Additional funding will have to come from another source yet to be determined. There just is not enough of my paycheck after funding the other accounts to put a substantial amount here as well.

Conclusion: Each account keeps me on track so I have cash available for immediate use as well as prioritizing my savings goals.

Could you adapt this method for your goals?

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