Savings Challenge #1 – Setting Up Your Savings for Success

Savings ChallengeIn the last 12 months, I have been on a crusade to save money. I have spent time combing over our budget and trying to find out where (as my husband says) we are bleeding money. Surprisingly, there are a lot of places that we could make changes without changing our lifestyle.

In addition to trying to cut costs this year, I have also committed to increasing our savings by actually putting money away. Here is a great way to passively put money away for savings, as well as some tips for what I call “earmarked” savings.

If you have spent any time near Pinterest or Facebook, I am sure you have come across the 52 – Week Savings Challenge. This is a great way to passively save money for your family without taking a “huge” hit.

If you follow the 52 week challenge as written, you will save $1378 over 52 weeks. Basically, you save $1 the first week, $2 the second week, and so on until you hit 52 weeks. I have seen where people save the inverse, $52 the first week, $51 the second week and so on, since you most likely have more money at the beginning of the year as opposed to in December and during the holidays.

For a few reasons, I like to stick with the traditional plan – first, at the end of the year, my husband hits the social security max, so we end up with a little more money at the end of the year. Secondly, we put away a few hundred dollars per paycheck into a separate savings account. This is directly deducted from my husband’s paycheck, and so far, we haven’t noticed the money missing. He just increased it, so hopefully we will still not feel the pinch.

We also decided to save double the amount of money – $2756 – since there are two of us. And instead of a big jar of money sitting on our kitchen island, we decided to save it in a Capital One Savings Account – it is great because you can open it with a dollar, there are no limits for the accounts, and it is not attached to your normal bank – which means it takes a couple days for transfers to happen. This helps you not “raid” the pickle jar for frivolous reasons. You can also set goals on your savings accounts, which helps with the “visual” that the jar on the counter provides.

I set up the automatic deductions on the Capital One account, all 52 transactions (it took me about half hour or so). Now I don’t have to think about transferring the money, just that I have to remember what is coming out of our checking account for budgeting purposes.

There are many ways to save using the same principle. If you have a big vacation planned next year, have property taxes that need to be paid, or are planning for a baby, this is a great way to passively save money. This is what I call earmarked savings. With many online banks (such as Capital One) you can have multiple savings accounts. This is a great way to make sure that you have funds not just for rainy days, but house improvements, property taxes, kids, tuition, vacations, pretty much anything that you need large sums of money for outside your monthly expenses.

In order to apply the same savings challenge principle to your earmarked savings accounts, first, determine what you want to save – $1000, $5000, or any number. Then divide the goal number by the number of weeks you have till you need the money. For example, if you expect $5000 in baby expenses, and you just found out you are pregnant, here is what you do:

$5000/(number of weeks you have to go – say 34 for example) = $ 147.05 needed per week. Seems like a lot, right? Well $150/ a week is much better than a surprise $5000 seven and a half months from now. It is also indicative that if it is hard to set aside that amount of money per week, you wouldn’t be able to save it, unless you plan on bonuses and random windfalls. And babies in general add that and more to your budget, so you might as well get used to the pinch now.

If the money truly isn’t in your budget, I will be exploring ways to save money by cutting costs. Check out my Savings Challenges for more ways to save.

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