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- My wife and I used to scramble every time we incur irregular expenses, such as HOA dues.
- We realized we could save per month for these types of expenses and always have cash on hand.
- Now we have 10 “buckets” in our Ally High Yield Savings Account that help us plan ahead.
Don’t you hate it when expenses sneak up on you when you’re not quite ready for them? Things like Christmas, birthdays, quarterly energy bills, and annual HOA fees.
A while ago, my wife and I were in the process of spending all of our money as received. we can Our income budgetbut it always seems like there’s something unexpected every month that will push us to the edge of our paycheck and leave nothing to save.
It was a really frustrating way of living, so when we started taking control of our finances, this was one of the first areas we tackled. We ended up making a strategy that includes 10 High yield savings accounts.
Expenses are not unexpected if they occur at the same time each year
I’m sure you were looking at the above examples and shaking your head in disbelief. How does something like a birthday or Christmas sneak up on you? It happens at the same time every year! The same is true for many seasonal or annual expenses. We can plan for it to happen every year and know roughly how much it costs. The big step for us was to take proactive steps and start calculating these expenses a year in advance.
Thinking proactively rather than reactive ensures that we always have the funds available when anticipated expenses arise. We were also able to spend more on the things that brought us happiness and not feel guilty about spending money on things we wanted rather than needs. We realized that as long as we meet our financial goals and the expenses are budgeted, it is okay to spend on luxuries and needs that bring us happiness and joy.
How do we decide how much to save each month
We started by listing all the expenses that come annually, quarterly, or within a specific time frame that we can plan in advance. Our list included:
- Emergency cases. You don’t know what they are, but you know they are coming.
- Our Memorial
- Birthdays for friends and family members that we plan to attend or send a gift for
- water bill
- Electricity bill
- Car Maintenance
- Summer wages for me as a teacher
- Sickness and vacation allowance for my self-employed wife
- Replacing the car every five to seven years
- Home maintenance such as roof replacement, appliances, and deck update
- summer holidays
With some, the cost was obvious, like the $600 HOA annual dues. But others need more thought.
We looked at how much we wanted to spend on things like birthdays, Christmas, and holidays to determine how much we needed to save. Our energy and water bills can be estimated based on the average we spend each quarter. Each cost was broken down into a monthly amount and then included in our budget.
We use high-yield savings accounts strategically
We found that the best place to store our money for future use is a file High Return Savings Account (HYSA) where you can earn us interest while we wait for it to be published.
Some of the money, like our quarterly energy and water bills, is stored in our checking account because three months is not a long time to build up any interest, but others are currently earning more than 2% interest in bank ally.
When it’s time to spend the money, we simply transfer it from Ally to our main checking account or set up an automatic debit. It feels great to have money ready and available when those expenses come due, rather than our old system of rushing for cash every time or needing more jobs, hours or side business to bring in more cash.
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Bucket system keeps us organized
We already have 10 Different High Yield Savings Accounts Buckets are where we save for our various purposes. We’ll have more, except that was the maximum per account holder!
This allows us to keep track of how much we have saved for each account and makes it easier for my wife or wife to spend the money and take it from the right place.
Using a bucket system like this has allowed us to save in an emergency, pay cash for a car, take vacations every summer, pay my summer salary when my full-time job dries up, and replace appliances because they broke down without ever having to. To confirm the source of funds.
Why not invest money to make it grow?
We asked ourselves this question and it came back to the general rule that if you need money in five years, you shouldn’t invest it.
This applies to emergency fund In particular, which can be called into action at any time, but also some long-term savings goals because we don’t want the market to fall when we need to distribute money.
Maybe we can take advantage of one year bondsWe are happy with our strategy and it is working towards our goals.