Money Management System and Savings Plans
I’ve decided that we need 5 savings accounts.
- Emergency Fund – don’t touch, almost ever.
- Planned Spending / Bills: This is basically my personal escrow account for property taxes, insurance, and also income taxes for 2015. Hopefully the need to have income taxes in there will drop out.
- Home Maintenance fund: I’ll contribute 1% of our house value per a year to start. I am hoping this will cover major things like new roofs, but not decorating and optional remodels. We’ll evaluate as we go.
- Short Term Savings: This is basically a slush fund to smooth out irregular spending, like home decor, travel, etc. This is the number we’ll look at when we are wondering “can we afford it?”.
- Targeted Savings: This account will only be crated and used as specific major needs arise. I’m assuming it will usually be one thing at a time. For example, once we do decide we want a new car or a bathroom remodel, this will be the place to do it. It doesn’t necessarily have to have a purpose, but it is for mid or longer term savings goals.
These accounts could be virtual (i.e. just in a spreadsheet) and live in one physical account, but I do have actual seperate accounts for each (under one login on Capital One 360). It makes me happier that way. I basically have this setup right now, with the exception of #5. It is the missing link to my puzzle! I also have one of these set up with check writing, so we can pay for large bills as needed. They are all linked together with easy online transfers.
I downloaded Yodlee’s (rather crappy) phone app and am actually using it to view our spending in key categories. Mint is likely a better solution here due to the better user interface, but I’m not motivated enough to make the transition.
I’m back to just zeroing out my credit cards on a regular basis, either when I get paid or when the balance is annoying me. I’ll attempt to update our spending and net worth monthly. This will be easy if I occasionally log into Yodlee and fix the categorizations in advance when needed. But in general, it is a pretty easy process.
I set up almost all of our bills with auto-pay. My paycheck goes straight to short term savings, T’s goes straight to the mortgage (the remainder in checking). I pay the credit card from my short term savings. I also finally set myself up with a library card and already downloaded a fresh e-book. Yay!
2015 Financial Goals did figure out what I want to do in 2015 as far as savings go:
- 15% minimum to pre-tax savings accounts
- 25k mortgage prepayment
- Add 8k to emergency fund
- Ad 10k to targeted savings for tbd / undisclosed purpose
- End year with property tax funded for following spring
- contribute 1% of house value to maintenance fund
- Double my monthly student loan payment
- Consider getting a dog. Maybe this is an anti-personal finance goal?
It kind of blows my mind that I think we’ll really be able to do all of that, without even considering raises and bonuses. Although it assumes some consulting income for T that may or may not materialize (he has an optional contract, but may not have the time). It does make me want to push more to pre-tax retirement, but we can always adjust that later in the year. Cash maybe isn’t the best investment, but it certainly isn’t a BAD thing to have.
I have one long term goal defined, which is to reduce the balance of our mortgage to 20% of its original value by August 2019 (5 years). Maybe we’ll knock that out of the park, maybe we won’t, but i think it is an achievable goal.
I probably should come up with some retirement account balance goals, but I just feel like we are really on track there. Maybe a net worth goal would be inspiring too. We’re definitely on track for $1M in some time frame, but… not a close enough time frame that I feel comfortable putting a goal out there.
It feels good to have a plan. We have been winging it, but I’m finally feeling comfortable with where we are at and where we need to be.