#SavingsOrganization #PrioritizingGoals #FinancialPlanning
Hey everyone! 🌟 I recently bought a house and now I’m trying to figure out the best way to organize my savings for all the things I want to achieve. How do you do it?
I have a bunch of things I want to save for like a new kitchen, a car, a holiday to escape from the chaos of home life 😅, possibly getting a pet, updating furniture and decor, and of course, having an emergency fund.
Do you use pots for your savings? How do you decide how much goes into each pot every month? I have a little in each pot but I’m struggling to prioritize – I want instant rewards but I know I need to focus on long-term goals too.
Would love to hear your system for organizing savings and how you prioritize different goals like mine. Any tips or tricks you can share? 🤔
One possible solution I’m thinking of is creating a detailed budget with clear savings goals for each category and setting up automatic transfers to each savings pot every month. This way, I can ensure I’m making progress towards all my goals without neglecting any of them. What do you think? Let’s help each other out! 💡
My immediate thought is that you’re trying to do too much with your money at the same time.
You should first build the emergency fund before you do anything. Perhaps 3-6 months worth of salary.
Once you have that, you need to prioritise your list based upon what YOU think is important. Do you need a new kitchen? Is your car falling apart? Some people will prioritise a car over a holiday, others won’t care about driving a 15 year car as long as they get to go a nice holiday every year. So you need to work out what the priorities are for you.
You then need to work out how much you want to spend on those things. I.e., is the kitchen 10k or 30k, is the car 3k or 40k. You then need to be realistic about how long that will take you to save for each and allocate the right amount of money to each pot to make that happen. If they are short term (in the next 1-5 years) you probably want to keep it as cash in a high interest paying account. If they are longer term goals, you may want to think about investing.
One point to note about a pet, that is an ongoing monthly cost, not just a once off cost so you would also need to think about how you budget for that on a monthly basis without it impacting your savings goals.
I found the flowchart to be very helpful. I know that’s the default answer but it helped me set my expectations for what I should probably be doing.
Currently I have 3 pots (Emergency Fund, House Project and ISA).
Emergency Fund is 12 months – I work in a niche area so for my level of risk this suits me.
ISA – currently maxed out for this year so savings to max out for next year.
House fund – putting away any excess cash from my budget usually 500+ per month.
When I bought my place 6 months ago my priority was reducing any debt liabilities, I sold my car (on finance) and bought one outright ,next step was replenishing the savings. So I weighted most of my income back towards that.
I then also had a percentage towards homeware so we could buy paint, accessories, some furniture etc
I’ve recently moved to a new monthly spreadsheet that I input my take home pay and divide it out into my various spending categories.
Now that we’ve done most of the initial work to the property and got my 12 month emergency fund my priority is to save the 20K for the ISA and then once this is done all that cash will go towards the next house project until April.
This is also all because I value my long term plan, I want to invest as much as I can now to benefit hopefully from that In 35 years or so and actually have a retirement which 5 or so years ago when I was not planning like this seemed impossible.
Against the grain here for most but don’t be afraid of using cheap finance facilities. We lived in our house for 10 years before doing the kitchen so it was about 20 years old before so needed replacing, so released some equity from mortgage to do it, it added value to the house as we have now just sold so in effect paid for itself.
I used a personal loan to buy our car, low interest, over 5 years, but have owned the car for almost 10 years now with no payments. Actually paid this one off a little earlier with a work bonus. £14k cost me about £15.5k. We needed new car and saving would take too long. We keep it well maintained and will drive it until it is no longer economical to keep it on the road. I wouldn’t hesitate in using a loan facility again (not specific car finance tho).
I have also used credit cards with 0% purchases and even my current credit cards sometimes have offers. For example one was offering 0% for any travel related purchases so I paid for a cruise and paid up before the 0% ran out.
A lot of this is when saving rates were terrible and interest rates were lower.
It takes discipline and you need to be sure you can make monthly payments. Pay off extra when you can/if you want.
I have also saved during all of this time and have circa £70k in a variety of savings.
I was in the same boat as you last year when I brought a house. We started from scratch with couple of furnitures when we moved in.
Firstly, focus on important furniture (bed, blinds, desk for work etc) and 3 months emergency fund. The furniture you see yourself using day to day basis. We put in a rule to “Buy once, never again”. Do not cheap out on the important furniture. Having a good mattress will last a lifetime better than a crap one!
Emergency Fund is one of the most important things to have a homeowner. So this is 3 – 6 months worth of mandatory expenses inside a high interest easy to access account. We use Chip and Monzo for their high rate and easy access accounts.
We personally just took a year out of not buying or going out, to build each other emergency Fund. It was a boring year, but very liberating when we will both hit our 6 months at the end of this month. Do the painful thing now rather than spreading it out. We are both looking forward to going on annual holidays, getting our own pet etc whilst having a good EF if something goes wrong.
Then everything else will become a domino effect with renovation, decor and less important furniture.
I would also put all your bills and subscription into a Google sheet. So you know what your paying every month in mandatory bills and how much you have left. Decide on creating a budget every month, and then use the left over money into pots and keep track of each pot. I use an app called “wallet by budget makers” to spread out my pots and track spending. At the end of the month, whatever left over money I have, I usually flush into my savings and restart.
i keep it simple. when pay packet arrives, 500 into cash isa (trading 212), 540 in sipp (vanguard), 500 in stocks and shares isa (vanguard), a sum into joint account for non discretionary bills, the rest is budgeted using ynab
So, we have a few accounts.
We have a joint account for salaries, bills and fuel (every single expense you could think of)
We have a holiday savings account
We have a general savings account (money for cleaner)
We have an additional savings account (day trips, nights out)
We have a home savings account (house emergency fund)
2 x separate Monzo accounts for our spending money.
Bit overkill but it works for us
Splitting money in to pots means you’ll never get anything quickly.
Write down what is important to you and a ball park amount it will cost. Don’t get hung up on getting the £ right. Just needs something to start with. Total it up and see where you land; divide by likely amount you’ll be able to put towards it each month. At least you then know how long everything will take as a whole – it might be an eye opener!
Sounds like a holiday might be important? What about a few nights away somewhere? Can you compromise if it means you can do something quicker?
Emergency fund would be my first go to. The boring sensible option. It doesn’t have to be 6 months – it could be 3 months.
Furniture etc. Pick the room you spend the most time in and focus on getting that right. You don’t need to sort the whole house.
I’d be tempted to NOT use finance. A new sofa on tick starts to add up quickly. It has its place however.
Is a new car a must? Will it save you money? If you have something that works for you right now I’d pop that at the end of the list.
Pet? Who looks after it when you go on holiday? If you have family then great but otherwise it’s very expensive.
Also remember things snowball all the time. Holiday? Suddenly in need for clothes etc.
This was me 2 years ago. I already had an emergency fund totally separate though- 3 months of living costs in premium bonds. Not hard to take out but hard enough that I won’t touch it.
I have one savings account in Monzo for things to spend within the year- holidays, house stuff including furniture, MOT etc. which never gets above about £2k, and a fixed rate ISA for a new bathroom, overpaying the mortgage at the end of the term and a car (It took 2 years to get enough for the bathroom which I am about to renovate, and I don’t really have an end date for the car as I will keep this one as long as I can).
Worked it out on a spreadsheet first and I keep it up to date monthly with how much is allocated to what thing.
I didn’t buy any expensive furniture- all from charity shops, ikea or eBay except sofa and bed. I have no problem having something for a few years and then using eBay or gumtree to get rid and get something else. I already had a dog, so that is an ongoing expense.
I have two types of savings,
1 set of savings for pretty much everything in your list, these are basically things that I’m going to want to make use of the money of in the not too distant future, therefore I don’t want any risk added to this. Emergency Fund should also be accessible in case of.. well, emergency. These savings go into typically the highest easy access savings account I can find although currently I’ve got it in a Monzo savings account for ease.
2nd set of Savings is future planning/early retirement fund, all that good stuff… this is invested in stocks and shares that I don’t really ever envisioning touching unless life is truly messed up or it’s time to make use of the money (again, early retirement, etc..).
Look at the UKPF flowchart for how to save and where to invest, but first things first should be removing debt and getting your emergency fund sorted.
I would probably put the emergency fund as the first priority, and get that sorted before thinking about any of the other things.
Beyond that, it’s up to you – what are your priorities? How soon do you want each thing? An annual holiday presumably has a fairly clearly defined timescale. A new kitchen could potentially wait years if necessary. A new car could go either way – your current car might be good for many years yet, or it could conk out next week and be beyond economic repair.
I tend not to use specified pots. Firstly because I tend to chase the highest interest rates, and that doesn’t necessarily suit having dedicated pots. Secondly because it allows a bit of flexibility – you might think now that a new kitchen is a priority, but once you live with the current kitchen for a few months it might stop bothering you so much and you decide something else is more important.