Our New Way to Save For Our (Yearly) Financial Expenses and Goals

My husband and I have been debt free except our mortgage since June 15, 2011.  We have always had a budget in place; however, it was extremely flexible (or what I like to call: willie-nillie).  If we went over budget in one area, we took from another.  Unfortunately, what suffered the most with this way of budgeting was our savings account and long-term savings goals.

I think I may be the natural saver in our relationship because I always felt we werent saving enough to meet our long-term savings goals.  To help rid of the anxiety I was experiencing about the (lack of) money we were putting into savings, I decided to try a new way of consistently saving money.

What I did was write down our yearly expenses and our yearly financial goals.  After I totaled up that number, I divided it by our yearly after-tax income.  This was pretty easy to do for us because we get paid the same amount each payperiod except for the extra week’s pay a few times a year (which I did not include in our yearly income number).

Our numbers looked a little something like this*:

Quarterly/Bi-Yearly/Yearly Expenses:

• Trash Pickup (Quarterly) - $50 x 4 -$200/year
• Property Tax (Bi-Yearly) - $650 x 2 - $1300/year
• Home Owner’s Insurance / Car Insurance - $1400/year
• Septic Inspection & Maintenance Contracts - $300/year
• Terminex - $250/year
• Propane - $1500/year
• Total: Approximately $5000

Yearly Financial Goals:

• Home Improvement Fund - $2,500
• Replacement Vehicle Fund / Car Maintenance - $2,500
• Roth IRA Accounts - $2,000 x 2 - $4,000/total
• Vacation Fund - $1,000
• Total: $10,000

As you can see, our yearly expenses and financial goals total $15,000*.  Once I had this number, I was able to divide it by our income to determine that we would have to save 40% of our income to meet our yearly expenses and financial goals.

Luckily, I have a husband who is willing to go along with whatever I want to try, so I began to implement this new way of saving the first week in August.  To date, this has worked well for us!

When we get paid (hubby gets paid every Friday, I get paid the 15^th & 30^th), I immediately transfer 40% of our income into our ING Direct savings account(s).  We then live off of the remaining balance of our income and pay our mortgage, utilities, gasoline, groceries and any other expense that may come up.  After everything is paid, I write how much we have in our checking account on the white board we have on the side of our refrigerator so that hubby knows how much we have until the next payday.  Sometimes it is a few hundred – other times, it is $60!

Within our ING Direct account, I have the following savings accounts set up:

• Emergency Fund
• Yearly Expenses
• Vehicle / Maintenance
• Home Improvement
• Roth IRA
• Vacation
• Rainy Day

With setting up our savings accounts this way, I can see where we stand at all times with our accounts.  Starting in 2013, we will first fund our yearly expenses fund, and then move on down the list from there.  Please note: we have a 3 month emergency fund in place, so that is why we are not starting to save in this fund before any others.  Any overage we save throughout the year will go into the rainy day and emergency fund (to beef it up).

With this way of budgeting, I now have peace of mind that we are saving an adequate amount of money, and Todd has peace of mind that I will not hoard all of our income into savings!

 

How do you budget for your yearly expenses and savings goals?

 

*These are not our true numbers, but are being used as an example to show how we are now “budgeting” for our yearly expenses and goals.