Friday, March 30, 2018

"Buckets" of Money

While our current savings goal is one larger dollar amount, the truth is that we save our money into clearly defined buckets so that we keep ourselves organized in terms of the intended purpose of that money.  At this moment, those "buckets" don't actually have their own goals attached to them, so each month in monitoring our progress toward our goal, I total up the transfers that go into each "bucket."

These "buckets" are separate savings accounts, which we name things related to their function, with an emphasis on creating names that make us feel good emotionally (more of that creating positive momentum business I keep talking about).  Another reason why doing this makes me really happy is because I feel like I am supporting my own future desires.  Perhaps the best way to explain is to simply list the names of some of our buckets:

  • Holiday & Taxes
  • Vacation
  • Future
  • Freedom Fund (We each have our own separate version of this long term savings.)
  • Rental Savings
  • Roth 401K (We each have our own.)
  • Roth IRA (We each have our own.)
It makes me happy to know that  when the bill from the accountant comes in, it's payment is a quick transfer away.  I also like knowing that when I see a great deal on airfare to somewhere we've been eyeing, we can jump on it because they cash has already been stashed!  Our rental income direct deposits into the rental savings, and the mortgage comes directly out of it, leaving behind savings that can be used toward any repair or improvement needed.  All of the funds from our side gigs are deposited directly into our individual Freedom Fund accounts, long term savings; Future is where our long term joint savings lives.  Roth 401k and Roth IRA are both retirement accounts.  If I were going to organize it into short, medium, and long term oriented accounts, it might look more like this:

Short Term:
  • Holiday & Taxes
  • Vacation
  • Rental Savings
Long Term:
  • Future
  • Freedom Funds (hers and mine)
Extra Long Term:
  • Roth 401Ks (both of ours)
  • Roth IRAs (both of ours)
This sort of system may or may not feel right for you, but in my life, I find that it feels really good to not have to worry about whether or not I am hurting my long term savings by pulling money our for a "shorter term" need.  I plan on going on vacation.  I would feel terrible if I pulled money out of "Future" or "Freedom Fund" to do so, but if the money is sitting there in "Vacation," I feel great about it.  Perhaps this won't matter very much to some people because you could argue that the numbers will come out the same, but to me, the emotional impact and momentum is vastly different.

Do you organize your money into various buckets?  Do you prefer to keep everything in one place?

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