So it is 2016, and thanks to my disastrous year last year I am trying to be a little bit better at planning. One of the blogs I have fallen in love with is Afford Anything because when it comes to financing and investments… I am clueless and I love how this blog breaks it down in ways that I can personally understand.
I came across a blog post titled The Savings Snowball and if I was going to be honest here, I had some serious insta-love for the concept, here are the basic steps taken from Afford Anything.
A Savings Snowball would work like this:
Step 1: Get out of debt.
Step 2: Throw every spare penny into one particular savings goal, such as building your emergency fund, saving for retirement, or jetting off to the Mexican Riviera.
Step 3: Once you’ve finished saving for one goal, you’ll feel a psychological “win” that will motivate you to save for the next goal … and the next one … and the one after that.
So I started thinking about this in a way that would work for me when my thoughts trailed into things that I have coming up that will cost money, and this got me to thinking about my budget over the next year, after all of that thinking…this is what I know.
I know I have to get out of debt.
I know I am going out of the country in December.
I know I am going to have to save money for Christmas.
I know I am needing to build my emergency fund to 1000 (min)
I know I am needing to start my RTW fund.
Everyone says that paying yourself is a must in order to build wealth, this is often ranked as high as getting out of debt (trust me I have read a LOT of blogs/articles/tweets… you name it). I know I have these expenses coming up, so it would be logical to save the money in small payments vs running around closer to the trip and putting it all on my credit card? I am trying to get out of debt after all.
I have already pretty much set up my plan for how I am going to get out of debt. I will share all of that later, I promise but I am not quite ready to share those details right now.
I took a long look at everything that I know I will need money for and came up with a budget for each of the “savings” I needed. Yes I set up a dedicated account for each of these items.
I am budgeting about $2000 for my spending money when I am out of the country or roughly $75 per paycheck between now and December, a lot easier than coming up with that money in November getting frustrated so I just charge it.
I am someone that buys throughout the year for Christmas gifts, I travel a lot and often pick up little trinkets from travels. That being said at the end of the year it never fails that I am running around trying to buy last minute gifts with money I do not have so what do I do? Charge it of course. This year I am setting up a dedicated account just for Christmas. Over the past 5 years I have spent approx $500 in last minute shopping. So my target is to save that. If I save $20 per paycheck starting now, I will have hit my goal. $20 now is way easier than $500 in December.
Save $1000 in my emergency fund, this savings goal is my priority goal. I want to have my emergency fund funded in the next 10 paychecks. So I am planning on automatically setting $100 a paycheck to go into that account, depending on where my debt is sitting I might keep that $100 going into this account or I might drop it to a smaller $25 and tackle debt with the remaining. We will see.
This year my goal is to save 2000 in my RTW fund, if I hit all my other savings goals then I would like to get it bumped up to 5k but as I am not leaving on this trip that soon, I am ok being more aggressive on other savings goals vs this goal.
These are things that I will have to save for, they are also expenses (except for the RTW fund) that I will incur this year, so I do feel it is important to save for them now so I am not running around worried about money, especially since two of them are at the end of the year. It will be much easier to break these into smaller payments now vs the expensive holiday season, cause let’s face it holiday season just adds up with unexpected expenses.
I have already scheduled automatic payments into these accounts so the money will be ready for me when/if I need it, once I hit a goal I will let you know what my next savings snowball will be!
What do you save for throughout the year?
Headliner Credit: Afford Anything