I was talking to a friend recently about budgeting and how I view my different bank accounts. She is very frugal, so she hates to spend money out of savings. I however attach a description to each account that helps take the emotions out of using those accounts for what they are there for. So my emergency fund, is like money that doesn’t exist. So if I have a car issue, or need money for something quick it’s there just for that. I keep plugging money away in it, so I know that we will get back there but there is no emotional feeling of having to spend that money other than, I’m glad I have this to cover my expenses. Same with my travel/present fund. I put money away so when we need extra money to travel or buy Christmas gifts its there. That is what the money is put aside for, no emotions other than I’m glad I have this money to use for this that I don’t have to worry about how to pay for things or rework my budget. Anyone else think like this or how do you guys approach your budgeting mindset?
I have three savings accounts: an e-fund in one, and a combined travel and annual fund tracked in a spreadsheet.
@VAYOH What would your annual fund be for? What % do you put towards travel? Or do you purchase down the road then save monthly?
My annual funds cover Special Events, local trips, Gifts, Car Maintenance, Charity, Hobbies, and Other/fines. At the beginning of the year, I allocate budgets for each category. I keep my monthly budget lower than my income, setting aside the extra from each paycheck. When annual expenses arise, I use those savings to cover them.
For my travel budget, I allocate about 15% of my net income. When I book travel, I immediately withdraw the amount from my travel account to pay for it.
That’s awesome you can budget that much for vacation and your yearly fund. Keep up the good work and enjoy those vacations!
We are DINKs with a very small mortgage! Haha it won’t last long, enjoying it while it lasts
That’s what we did until we had kids. Boy did our budget sure change!
This sounds similar to my approach. I allocate money to different accounts so I always know exactly how much is available for spending on food/petrol/clothes etc. I’ve worked like this for many years and can’t imagine doing it differently.
Curious if you actually use multiple accounts to save these things or a single account and track funds in them . I.e travel fund, emergency, etc
I use ynab so it’s categorized on that individually but in reality it’s all in my checking account so it’s ready to go when needed.
@DAVE Makes sense. How do you like ynab? I’ve wanted to try it out