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Savings "Buckets"

January 11th, 2009 at 08:48 am

Not too long ago BA http://ba.savingadvice.com/2008/12/29/charting_46621/ a graphic about savings buckets and it made me think about mine. "Pay myself first" has long been my motto and a deposit to my savings is always the first "bill" to get paid each month. Over the years, to manage my savings, I've experimented with different strategies and eventually settled on keeping separate accounts (buckets) for different purposes. Some people might think it's a lot to keep track of, but it works for me and that's what matters. To eliminate paper clutter, I access my statements online.

Here is the current situation with my savings buckets:

Reserve Account #1: Used for periodic expenses such as taxes, insurance, HOA and timeshare dues, ID home expenses, etc. I deposit a predetermined amount from our income (my pension and dh's job) to this account each month. I use a "moneylink" feature that enables easy transfers to and from my checking account.

Reserve Account #2: Used for rental property expenses. I deposit a small amount to this account monthly in addition to a small but consistent net rental income. The savings account is linked to a dedicated checking account used only for rental expenses. The purpose is to have a reserve to offset any vacancies and to pay for maintenance and repairs.

Emergency Fund: This account contains ~2 years of "no-frills" living expenses, to be used in the unlikely event that a major economic meltdown results in our state teachers' pension funds being frozen, reduced, or eliminated. In this economy, you just can't count on anything being constant, so I believe in being prepared. These funds are in staggered CDs earning 3.75-4.17%.

Tax Sheltered Retirement Accounts: Now that I'm retired I can no longer contribute to these accounts, but dh will contribute to his until he retires in June, 2009. I am not sure when we will draw from these, but we'd like to hold off until the mandatory age of 70 1/2. The financial planner I've used for many years has invested my 403b and IRA funds in various products that preserve the principal and earn a return of 2-5%. I have always opted for a "conservative" approach with my retirement funds, even when we've been in a bull market, something I'm now happy about given the state of the economy.

Personal Savings: Dh and I each have our own personal savings account that is our sole and separate property. Mine is with WAMU/Chase and his is with a credit union. We are free to use these funds as we please. For example, we draw from these accounts when we need to subsidize travel, a new laptop, or anything else. We each deposit equal amounts into these accounts each month, ~15-20% of our income.

My Fun Fund: Dh and I have a goal of traveling more in our retirement. So, I've decided to dedicate my small ING savings account for travel. The money saved in this travel account will include net earnings from consulting or part-time work and other misc. sources (e.g., recycling, rebates, etc.). Travel can be expensive, so having this dedicated account will motivated me to save in small ways that add up over time.

So, not including the retirement accounts, I have two "reserve" accounts, an emergency fund, our two personal savings accounts, and the ING Fun Fund, for a total of SIX accounts. It is a lot to track, but going online for balances and using a spreadsheet fore record-keeping makes the management easy. Especially now that I am retired, my savings gives me peace of mind, not to mention some welcome passive income.

Note: Stock dividends also provide passive income, but it is automatically reinvested. I don't consider the brokerage account as a "savings" account but rather an investment account that is liquid.

5 Responses to “Savings "Buckets"”

  1. fruitbowlk Says:

    Looks good.

  2. Ima saver Says:

    I have many accounts also. I have one just for property tax, house insurance and car insurances just like you do.

  3. koppur Says:

    I have 3 right now, but have been thinking I need to start a 4th one. I have one for House stuff (new couch is what we are focusing on right now, but will eventually become a savings for a house downpayment), a personal account I can use for anything I want, and an EF. Since I don't work, I don't have anything like a retirement account. I'm thinking I need to start a Future Account, in case something happens and I don't get the monthy money I get now anymore. But with not working, it comes down to, where do I find the money to save? Everything that does come in really needs to go to living exspenses.

  4. nance Says:

    I've been "juggling" three accounts, and am seriously considering putting it all in one account. I keep the money for property taxes and insurance in one account, but it isn't getting much interest, so I think it is going to go in savings.

  5. jIM_Ohio Says:

    3 accounts

    1 for expenses which I have now but will NOT have in retirement. Mortgage and IRAs for example.
    1 for expenses which always exist (utlitities, groceries, etc..)
    1 for savings

    If I track all deposits into second account listed, I know the expenses I need to replace in retirement.

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