Hello everyone! Welcome back to BirthMay 2022! Today’s post is all about how I allocate out my savings towards my goals.
In case you’re new, every May I blog every day and call it BirthMay! Why? Because it’s my birth month and I’m super extra.
Now, I’m not a finance expert, but personal finance has been something I’ve become very interested and passionate about recently, so I am so excited to share what I’ve learned. There are many, many resources for personal finance available so I always say if something I say interests you, go to Google or YouTube to learn more, but make sure to get all types of perspectives and don’t follow those weird cult-like “gurus”! No one has the one right away as personal finance is, well, personal! Everyone’s needs are different and so should everyone’s process. This is just what has worked for me!
Finance Friday: Allocating My Savings
So savings has always been something that has been tricky for me to track. The best thing I did was move my savings out of my checking account and into an actual savings account so it’s not all lumped into the same place. Back when I didn’t have a ton of savings it was a blurry line between savings and spending money, and I think it would have made more sense to separate it out earlier. But I actually didn’t separate it until maybe two years ago!
I did end up moving my savings into a High Yield Savings Account (HYSA), and I do wish I’d done that sooner. Sure, the interest isn’t a lot, but it does add up, as always. I wish I had even put it in a regular bank savings account even! But now it’s at a HYSA and I’m never going back! Now, for a HYSA I’ve found that you typically have to use an institution that is online only and doesn’t have physical branches. Since they save those costs, those online banks have the ability to offer the higher interest rates. Love that for us! There are a lot of really popular ones like Marcus (that’s the one I picked!) or Ally, and some less popular ones but always do some research and get first-hand accounts if you are unsure which to pick.
Some HYSA institutions allow for “buckets” or sub-categories where you can allocate money in the app. I believe Ally is the most common one that does this. I love that idea and I wish others offered that! Since mine does not, I have to manually track it on my end. I ended up making a specific buckets area on my Excel budget template for each month. I suppose I could have done it in a separate tab but I’m fine with doing it on the monthly sheet in the workbook. It’s very simple. I add the total in my HYSA to the top and then add in the “buckets” below with the target amount and the actual amount I’ve allocated so far. For example, I have my own emergency savings, my dog’s emergency savings, savings for a house down payment, a travel fund, and a moving fund for when I eventually decide where to live that is on top of the down payment savings. Once I have a full down payment saved, I plan to save for an emergency savings for the house, since I hear there’s always something that needs repairing!
I am the type to save more than I might “need” to according to most experts. For example, most people say you need 3-6 months of expenses and no more for emergency savings. For me, I tend to keep a year’s amount since my basic expenses are very low, and it wouldn’t be realistic to keep such a low amount if an emergency came up. (I live in my parent’s home, so my rent and other expenses are minimal.) A year’s amount for me is a more typical amount for anyone else. I also keep a separate dog emergency savings account, just in case! Another reason I tend to keep more is because of the pandemic. After the pandemic hit, I was furloughed from my job in the events industry. I spent over a year unemployed as I applied and applied to jobs to no avail. Eventually I was able to get a job at a higher salary than I’d held before the pandemic, and then left for another new job with an even higher salary, but that was still a year that I’d been reliant on unemployment! Now, I got to experience the extra pandemic funds for awhile, but unemployment is not a ton without it, so I definitely prefer to keep my savings pretty high. And another reason is because I’m a first generation American! Many kids of immigrants will understand this one, at least from what I’ve seen on TikTok. Our parents, unfamiliar and wary of the American financial systems, would harp on saving, as they did not understand investing. Their focus was on surviving the day-to-day rather than growing wealth, and didn’t really focus on learning and finding resources. So a lot of us are having to do the hard work of unlearning their habits and learning how to grow and manage our wealth. It’s tough but totally doable!
Something that I find most people recommend and that I 100% agree with is to always fund the emergency savings account first! That is definitely something I did! Once I had my emergency savings I moved onto other things. At the time when I started this system I had been planning to buy a car, so that was the next bucket I added, along with the travel fund. But then I bought my old car back from my sister for a few grand so I paid her cash and I dumped the car fund into the house fund instead. I love how easy it is to change my mind and there’s no real work I have to do other than to type in a new amount in my spreadsheet. When I adopted my dog, I grabbed some of that car fund back and moved it to his emergency fund, since that was more important to have than a future house fund for me. Of course, all the money could be used for an emergency if it was really necessary, but it’s still helpful to have a specific amount for each category and it’s a great peace of mind to see those goals have been met.
Now, savings was a ton harder when I wasn’t earning as much, and I did work for minimum wage for a while. My best recommendation for increasing savings is actually to increase income without increasing expenses. It’s hard to do and even has it’s own term in personal finance, known as “lifestyle creep” or other variations. I did a post that I liked there about fighting lifestyle creep but it’s so hard to do. I have managed to achieve this by basically becoming a hermit! That’s not even really a joke, I literally have. The pandemic helped a lot with that but I don’t go to nearly as many musicals as I once did, which are expensive outings. I stopped buying books and instead get them from my local public library. So while lowering expenses is great, I know it’s hard and I am more a fan of recognizing and fighting lifestyle creep over “not buying Starbucks and avocado toast” or whatever else the Boomers are blaming Millennials for these days!
At the end of the day, it takes time and effort to build a good savings account. It’s hard to be patient but it’s so satisfying to reach those savings goals!
Feel free to share your savings tips and tricks. I’m always learning and would appreciate your insight too!
Thanks for reading!
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