Make Your Savings Multi-Task

There’s no trick here – as you might expect, savings refers to the money that you put into your savings account. However, in my system, you’ll also use this account as a holding tank for the money to pay your yearly and 6-month expenses. Remember when I had you convert your annual and semi-annual expenses to monthly amounts on your budget worksheet? That move was in preparation for this phase of the system.

It’s very difficult to pay for a vacation if you haven’t saved for it throughout the year. The same is true of property tax payments, car insurance, the holidays, and other bills. Have you ever heard of a Christmas Club? (I guess it dates you if you say yes!) Many banks used to offer this type of plan to encourage people to save a small amount each month to be withdrawn and used in December to pay for Christmas gifts, so they wouldn’t have to go into debt. It’s a great concept – one that can be applied to every annual bill you have.

Your first step is to list the bills that you pay every year or every 6 months. Be sure to include expenses like vacation, Christmas or Hanukkah, and your actual savings amount.

Next, group them together in logical groups. For example, your property tax bill and your auto insurance bill would fit together in a tax & insurance fund, which could also include your car registration, homeowner’s or renter’s insurance, life insurance, etc. You might have a school expenses group if you have children in private school or college. You get the idea…

My account is actually made up of 8 different pools of money:

  • medical emergencies
  • tax & insurance
  • house repairs
  • new car
  • vacation
  • Christmas
  • interest
  • savings

Your account may look very different from mine. It depends on what bills you have or what things you need to save for. The point is to add a little to your savings “pools” each month so the money is available to pay your annual and semi-annual bills (or major purchases) when they come due.

Once you’ve listed all your long-term expenses and grouped them appropriately, the next step is to add up the monthly amount for each of these expenses (from your personal or household budget worksheet.) This total is the amount of your savings expense each month.

Based on when you receive income during the month, decide when this expense will be paid to your account each month, and enter this on your monthly budget planner on that date.

I keep track of everything in a notebook so I always know the total in each group, or “pool”, as well as how much I add to, or subtract from, each pool every time I make a savings transaction.

I draw columns on my notebook page to divide it into the number of “pools” that I need. I put the name of each pool at the top of each column. If you looked at my book right now you would see something like this…

Savings account workbook example

If you prefer your computer to the pencil-and-paper method, this works well in a program like Excel. The added benefit in Excel is that the columns will total automatically for you. I love the old-fashioned, hands-on method, but either way works fine – it’s entirely up to you.

This is how this system works for me:

  • Every month I make a savings deposit that adds money to most of these pools. I add up the amounts I want to put into each pool and the total is the amount that I deposit.
  • Before I make the deposit I write the entries in my notebook – listing the amount going into each pool, then totaling each column so I have a new balance for each pool.
  • I write the total amount of my deposit in the Total column, and add it to the previous balance to get my new total.
  • Then, as one last check on my math, I add across – making sure the new totals from all the columns equal the new balance in the Total column.
  • If it all checks out I enter the amount of my deposit in my savings account register and make sure the new total there is the same as the total in my notebook. If it is, I’m done.
  • If it doesn’t balance here, or if my notebook columns don’t balance to my notebook Total, it means I have a math error so I have to go back over my column totals to find my mistake.

This may seem like a lot of busy work that you’re tempted to skip. But hear me – Don’t skip it! This process will help you get control of your money, plan for large expenditures, and help end your dependence on credit. Followed consistently, this single part of the plan will make your life easier and help alleviate the stress caused by unexpected expenses.

Return from Savings to Living on a Budget

Return to Monthly Budget Planner: Intro & Overview
Return to The Monthly Budget Planner In Detail