Maybe having savings is a goal of yours, and right now you are spending what you make. Maybe you have savings but would like to improve your process. What I want to offer you today is the idea that managing savings is not just about the dollar amount we accumulate. It is also about our mindset, feelings, and assigning purpose. We can learn how to save mindfully.
I recommend splitting savings into 3 purposes in order to save mindfully:
1) Sinking funds
Let’s talk about sinking funds first. If you are just starting to save excess funds, past paying your month to month bills, sinking funds are the best place to start.
Traditionally, sinking funds are used by businesses to set aside money each month in order to pay off debt. But you can use the same system to plan for things you will need or want. Things like: winter tires, getting your hair colored, a trip, or summer camp. Those are all things that you know will happen and approximately when, but they don’t fall into your regular month to month expenses.
Preparing for the one-off larger purchases can be the first step to getting out of credit card debt. We tend to put what doesn’t fall into our reoccurring expenses on a card. Get out of this cycle by setting aside a little money each month to be able to pay for those things when they come up.
For example, lets say you usually spend $1000 on Christmas for gifts, travel, decorations etc. Start by setting aside $100 a month now, and by Christmas, you can buy everything you need to with ease rather than stress or guilt.
Another way to set up sinking funds is by assigning larger amounts of incoming cash to a sinking fund. A tax return, bonus, inheritance or gift can be put in a separate account, with your intention of how to spend it already set. This helps prevent mindless spending of large influxes of cash.
2) Emergency Fund
It is very helpful to have your emergency fund (guide to building one) separate from all other forms of savings. If all your savings is together in one bank account you can set yourself to feel like a failure. For example, when you go on vacation, and you transfer money from your savings to your checking, you may feel like your are failing by taking money from emergency funds.
Solve this by separating the funds and assigning purpose more realistically. It can be transformative to acknowledge to yourself that some of your emergency fund may not truly be intended for emergencies. Being transparent with yourself will serve you well because it will change your energy when you spend. Of course, you’ll want to ensure you have enough set aside for emergencies to feel financially safe before redistributing to other categories.
3) Long-Term Savings
If your sinking funds are set, and your emergency fund is fully funded, the next bucket to fill up is long-term savings. Savings can be for a future unknown purpose, not meant to be touched anytime soon. When the time is right in your life, and new priorities arise, your intuition will let you know its time to use it. Some examples are a down payment on a house, going back to school, or fertility treatment.
Wishing you success and ease on your savings journey. If you want a partner and a guide, book a free consultation with me.
