Everyone has different ways to save money. Some segregate it by the amount needed while some segregate it by the differing levels of priorities. Whichever your case or reason for saving is, we all have to admit that having that savings is important. Save to invest, save to buy something nice, save to go on a holiday or saving for retirement. Everything starts with putting aside that 1st dollar. I do not know what methods you use but here is what I do.
Firstly, I come up with a list of all the things that I would require the money for - just for stuff with larger monetary outlay. For example :
Annual fixed expenses - For insurance, road tax and stuff like that.
Emergency funds - For unexpected expenses like hospital bills, home repairs or unexpected loss of cashflow.
Large Scale Holidays - For example, I want to go on a month long holiday in 2020 to Alaska.
Impulse Funds - For rare occasions when I feel like I deserve to indulge as I rarely buy stuff anymore - even gadgets. I'll just let this fund grow till I eventually want or need to buy something.
Renovation Funds - As I am getting my new home soon, in hopefully about 6 months, I would need money for renovation and furniture. Now, my home is something that I do not want to stingy with as it would be where my wife and I would be living so I guess I'll need a reasonably large amount of funds here.
Secondly, I would determine the level of importance and the amount of time I have before I would have to utilize the fund therefore setting its priorities. Here is an example
1) Annual Fixed Expenses
2) Renovation Fund
3) Emergency Fund
4) Large Scale Holiday Fund
4) Impulse Fund
The reason I did not put emergency fund as my top priority is because I have already set that aside and will only top it up should I ever utilize it. The large scale holiday fund and impulse funds share the same level of importance so any funds flowing into them will be split 50/50
Anyway, here is how the overflow system works. When funds come into the bank, a portion 1 of it would firstly be set aside for monthly expenses. Portion 2 would be set aside for savings and investments. The third portion would then be put into a holding account. This holding account would then be put to fill up the items on the list. Starting with item one. When that reaches its target, the funds would then overflow to item 2 and so on and so forth. It might sound a little tedious or complicated but once you get used to it, its quite a good way to do things. I love having a system so I don's miss out on important stuff.
How do you prioritize and save for items on your list? Sharing is caring - so please help each other out with ideas.
As always, save more, spend less and invest wisely.
P.
