Some days I just need to crunch numbers, you know that?
I’m usually pretty good at welcoming change. If I’m nervous about an aspect of the change, I research it. I’m fairly analytical. My mom calls it anally retentive, but we agree to disagree on that one.
To calm my nerves about the upcoming shift in my finances, I figured it would be a good idea to set myself a series of mini goals. Afterwards I decided to figure out if they were even remotely attainable in the short term. It did a good job of soothing me, and I ended up coming up with 5 short term savings goals:
(listed by priority)
1) Save $1000 in an emergency fund.
Also known as my “The-economy-just-went-to-crap-where-did-my-job-go?” fund. I’ll be keeping this as cash for now so that it’s accessible in case of emergency. The $1000 is just a starter balance, as I intend to continue saving money in here. I’ll probably cap it at a maximum of $10,000 – If I have more than that in savings I’ll move it into an investment account. That gives me about 4 months of living expenses in cash.
2) Save $1000 in an investment account.
I prematurely tried to open a low cost investment account last year only to find out that the minimum starting balance was $1000. So, I need to save $1000. This is also just a starter balance, as I intend to add to it over time. I have no intentions of limiting the balance on this account. Why is the priority on this higher than others in the list? Frankly, I want to be wealthier than I am right now. Full stop.
3) Save $500 in a travel savings fund.
I’m already going to Vancouver Island for a wedding this summer, and it sounds like some of The Boy’s friends want to do a Shuswap boat trip this summer as well. I’ll be needing this money sooner rather than later, so I’d like to put $500 towards this account fairly quickly. I’ll be capping this account balance at $5,000. I figure If I have more than that saved in there I haven’t been getting out much and I’m obviously in need of a vacation.
4) Save $500 in a home savings fund.
These will also be getting used quite quickly, as I’ll need to pick up supplies for blowing insulation into my attic this summer, as well as finishing my stairs. In the longer term this account will be used to look after larger expenses like replacing a furnace or roof shingles. I’ll be limiting this account to $10,000 as well.
5) Save $500 in a car savings fund.
Let’s face it, my little beater isn’t going to last forever. It would be really nice if it did, but it probably won’t. I don’t know that it will last this long, but I’m going to cap this account at $15,000.
My short term savings goals come to $3,500. Not bad, but how realistic is it in the short term? I figured I should actually figure how how much money I was going to be setting aside each pay period, so I’d know whether or not I’d be able to save the money by the point that I needed them by.
Emergency fund – $100/payday
Investment account – $100/payday
Travel fund – $100/payday
Housework fund – $100/payday
Car fund – $100/payday
Christmas fund – $50/payday
After setting $300, $400, $500 aside for debt repayment each pay period, looking at $100 savings lines feels pitiful in comparison. I had to remind myself that I wasn’t saving $100, I was saving multiples of $100. $550 per pay period to be exact.
But doesn’t putting equal amounts into different accounts every pay period defeat the purpose of prioritizing the savings goals? Not really. If this was all I was doing I’d reach my goals 3-5 long before I finished 1 & 2. In addition to the budgeted savings amounts, I’m also going to be employing sloughing again. At the end of every pay period, whatever is left over in my account will get sloughed onto the savings account with the highest priority that hasn’t met its minimum yet. I may find that by the time I get to number 3, 4 and 5 that the minimums will have already been met with the regular pay period contributions, so this likely won’t affect them.
After all of the account minimums have been met, the end of the pay period slush money will go into my RRSP to pay back my HBP. Once my annual $1000 HBP repayment has been met, the remaining slush money will go onto my mortgage.
Slush money snow flakes are wonderful things.
Can I even do this on my income?
As it turns out, yes, I can. I took my two most recent budgets and stripped them down to the essentials: mortgage, RPP contributions, insurance, utilities, food in, fuel, that sort of thing. I also included my cell phone and internet. Everything else however was gone. I totalled this up, added the $550 worth of savings, and tacked on $280 of something I’m calling “Me Money”. My “Me Money” description turned into a post of its own, so I’ll be elaborating on the concept in tomorrow’s post.
Add it all up and I get totals I can work with in both the fat and lean weeks. I’m tickled pink about this. With these amounts going into savings every pay period, I’m saving around 20% of my gross income. I didn’t plan it that way, it’s just how the numbers panned out.
What do you guys think? Would you rejig the numbers personally, or would you keep them as is?
Recommended Reading: Destroying Our Mortgage Debt.