Don’t you hate it when you are cruisin’ along, rockin’ your awesome budget for the month and you get blindsided by unexpected expenses?! Thing like birthdays, Christmas and anniversaries pop up out of NOWHERE and surprise you! Now your perfectly normal month just got turned upside-down by all of these different occasions. I can’t believe the nerve of some people, being born and celebrating it on the SAME DAY, EVERY YEAR. What’s up with that? Anyway, if you find yourself in this situation, no need to fear, because you actually already planned for it. Wait…….you did plan for it……right?
What Is A Savings Bucket?
When you have an expense that does not re-occur every single month, you sometimes forget that it’s coming up and thereby you don’t have any money planned for that expense. Examples of these types of expenses are; Christmas, birthdays, anniversaries, car maintenance, vacations and bills that you pay every other month or every 6 months. These expenses can be expected to happen throughout the year (most of them at the same time every year), but for some reason there is a cognitive block around remembering to have actual MONEY available to pay for these things. That’s where your Savings Bucket will come in.
A Savings Bucket is a savings account with money set aside for each of these categories. In Part 3 of the Budgeting Basics series, we talked about setting goals and how to reach them every time. You come up with an amount that you would like to save by a certain date and reverse engineer it by figuring out how much you need to save per month to reach that goal. I suggest you put this money in a savings account and keep track of it by category. I have a spreadsheet that helps me track each deposit into my savings account and splits it out by category, so I always know how much I have saved for each item.
Here’s an example of one of my savings bucket categories:
| Date | Bday/Anniversary | Amount |
| 1-Jan | January | $ 50.00 |
| 1-Feb | February | $ 50.00 |
| 14-Feb | Vday | $ (50.00) |
| 1-Mar | March | $ 50.00 |
| 1-Apr | April | $ 50.00 |
| 17-Apr | Michelle Bday | $ (150.00) |
| 1-May | May | $ 50.00 |
| 1-Jun | June | $ 50.00 |
| 1-Jul | July | $ 50.00 |
| 1-Aug | August | $ 50.00 |
| 2-Aug | Anniversary | $ - |
| 31-Dec | Jake | $ - |
| Current Total | $ 200.00 |
I save $50 a month in this category which pays for Valentine’s Day, Michelle and my birthdays and our Anniversary. You can see when the event shows up, I just transfer the money that’s already there into my checking account and SPEND IT. I never have to worry if I have the money for any occasion because I have anticipated the need, set a goal and saved up for it. AND THAT’S IT!
Phew! That was easy. I suggest having a savings bucket account that you dump all of your money for these categories in and then you can just keep track of it in excel. If you are patient, I will upload my budget template spreadsheet soon and walk you through how to use the “Savings bucket” tab to keep track of all of these categories in one account.
Let’s Review
Thank you for reading through the Budgeting Basics series. I LOVED writing this because it’s how my wife and I changed our financial future for the better and I hope that anyone reading this can do the same. This is by no means an exhaustive guide on budgeting, but I wanted it to be a great starting point to get people talking about their finances and really considering how they handle their money. Let’s review what we’ve covered in this Series:
Part 1: Laying Your Financial Foundation
In part 1 we talked about writing out your priorities, which will help guide how you make decisions about where your money goes.
Part 2: Tracking Your Income and Expenses
In part 2 we detailed how to track your income and expenses, allowing you to see exactly where your money has been going for the last few months.
Part 3: Setting Up Your Budget and Reverse Engineering Your Goals
In part 3 we went through how to set up your budget on paper before the month begins and talked about goal setting.
Part 4: Why You Should Get a Month Ahead
In part 4 we talked about getting a month ahead on your budget and the freedom it allows you.
Part 5: Your Savings Bucket
And finally, in part 5 we talked about how to utilize savings buckets to ensure that you always have money saved up for those “unexpected” occasions.
CONGRATULATIONS ON TAKING YOUR FIRST STEPS TO FINANCIAL FREEDOM!
Comments: For those that have completed the budgeting basics series, how does it feel? Do you feel more in control of your finances and ready to take on the world? For those who haven’t, what is keeping your from doing a budget? For those that have been on a budget for years, did you gain anything from this series? I would love to hear your thoughts and insights on how this works for you or how it can be improved. I am constantly learning as well, so let me know!