Benefits of creating sub-savings accounts for budgeting
Jul 25, 2023Building a Budget
In this post we will explore the
benefits of using sub-savings accounts or “buckets” as a way to budget expenses
and what that looks like when setting up your accounts.
Get organized: Sub-savings
accounts help you stay organized and allow you to divide your money into
different categories or goals, like monthly bills, entertainment, long-term savings,
or emergencies. This way of organizing your finances makes it easier to track
your spending and avoid overspending.
Be disciplined: Distributing
your money into different buckets can help you stay disciplined by setting
spending limits for each account, ensuring you don't dip into funds meant for
Saving for an emergency:
Having a dedicated bucket for emergencies provides a sense of security. By
allocating a portion of your income to an emergency savings account, you'll be
better prepared to handle unexpected expenses.
Set it and forget it:
Sub-savings accounts are great tools for setting and achieving savings goals.
Creating separate “buckets” for each goal keeps your savings organized. Set up
accounts at your financial institution and “hide” your accounts from view so
that you’re not tempted to spend the money!
Setting up various accounts to track and budget
your income are powerful tools for effective budgeting. By utilizing
sub-savings accounts, you can take control of your finances, reduce stress, and
work towards a brighter financial future.
categorize my sub-savings accounts
Let’s explore how you could categorize your
sub-savings accounts to help you better manage your finances.
Emergency Fund: This bucket is essential
for unexpected expenses. Start with a goal of $1000 and then work your way up
to 3-6 months' worth of living expenses.
Long-Term Savings: This bucket focuses
on long-term financial objectives like retirement, education, buying a house or
Debt Repayment: If you have outstanding
debts, allocate a bucket specifically for debt repayment. Prioritize
high-interest debts like credit cards or loans with higher interest rates to
save on interest payments.
Monthly Bills: This category includes
fixed expenses like rent/mortgage, utilities, insurance, and your phone bill.
Allocate a portion of your income to cover these expenses and ensure they are
paid on time.
Groceries and Household: Set aside funds
for groceries, cleaning supplies, toiletries, and other household essentials.
These items would be considered variable items, and can change in cost from
month to month, so be sure to monitor what you’re spending from this account.
Gas: With the price of fuel on the rise,
be sure to factor in what you would spend on gas.
Entertainment (Fun bucket!): Allocate a
portion of your income for entertainment, hobbies, dining out, movies,
concerts, and other fun activities.
Vacations: Allocate a portion of your
income for a vacation you’re planning for, this way you don’t rely on your
credit card, and funds you may not have.
Miscellaneous: Set aside a small
percentage of your income for miscellaneous expenses that may arise, such as
gifts, unexpected purchases, or small indulgences.
If you would like assistance setting up
sub-savings accounts and learning how to organize your finances, set up some
time to meet with a HAPO Certified Financial Coach!
Want to learn more? Listen in to our latest podcast episode where author, Sebrina Wizner, discusses budgeting and saving strategies.