Budgeting #Savings #PersonalFinance
What Do You Count As Savings When It Comes to Your Budget? π€·ββοΈπ°
Budgeting can be a tricky game. You’ve got to juggle your daily expenses, long-term goals, and unexpected costs. So, when it comes to figuring out what counts as savings in your budget, it can get a bit confusing. Letβs break it down! π
Understanding Basic Savings Categories π¦
When we think of savings, the typical categories come to mind:
- Emergency Fund: Money set aside for unexpected expenses like medical bills or job loss.
- Retirement Savings: Investments or contributions to accounts like a 401(k) or IRA.
- General Savings: For long-term goals or big purchases, like a house down payment.
However, savings are more nuanced than these basic categories.
Short-term vs. Long-term Savings Goals π―
Not all savings are created equal. There are short-term savings, like your holiday fund, and long-term savings, like your retirement account. Both play crucial roles in your financial stability.
Is Everything Really Savings? π€
So, is your car maintenance fund a type of savings? What about your holiday fund?
- Car Maintenance Account: Sure, youβre setting money aside, but itβs for anticipated expenses. π
- Holiday Fund: Youβre saving up, but itβs for a future expenditure rather than an unexpected need. π΄
Though these funds are essential, they have a clear purpose and will eventually be spent.
Defining True Savings π
True savings, in the traditional sense, are funds set aside without a predetermined expense:
- Stocks and Shares ISA: Investments set aside to grow wealth over time.
- Monthly Saver Accounts: Money saved consistently over time, possibly for no specific short-term use.
Strategic Budgeting Tips βοΈ
Here’s how to categorize and manage your finances effectively:
- Separate Accounts: Use different accounts for different savings purposes to avoid confusion.
- Automatic Transfers: Set up automatic transfers to both your short-term and long-term savings to keep your goals on track.
- Reevaluate Regularly: Review and adjust your savings plan as your financial situation and goals change.
Final Thoughts π
When it comes to budgeting, all your various savings accounts play a role. While funds for car maintenance, holidays, and Christmas are vital for your financial health, they donβt truly count as βsavingsβ in the traditional sense. True savings are your untapped resources like your Stocks and Shares ISA and your Monthly Saver which aren’t earmarked for spending anytime soon.
By recognizing the different roles these funds play in your budget, you can better manage your finances and achieve both your long-term and short-term goals. Happy budgeting! π΅β¨
Well, technically it is still savings as you have the money and should an emergency happen and you needed the money from all accounts, you could use it.
I personally have my savings with Trading212 and the Help to save scheme. Nothing more than this. But should I want to go on a holiday, I would get the funds from the main savings account. So all of them are within one account. Just different ways of savings.
any kind of setting money aside is savings.
I have a Cash buffer which acts as misc spending or money for gifts, itβs money to spend if I want in the future. When spent, I will build it back up over time – thatβs separate from other βsavingsβ in my mind but itβs all in the same savings account on paper
So personally I refer to “yearly planned expenses” in my budgeting models
I look at my monthly pay, and take out the amount I will need/budgeted for in the coming month and leave that in my current account, and any remainder I pay into my “savings”.
That monthly amount into savings, times 12 months is my “year total into savings” and then on the spreadsheet I take off the yearly expenditures to find out how much my savings will have gone up by by the year end
I only count car expenses (insurance/servicing) in that yearly planned expenses category though (I would probably count Christmas/birthdays if I had kids though too)
I dont have a specific holiday/tech fund but I like that Idea. IMO I think I’d call that savings too. Basically savings is any money I have that isn’t earmarked for something else
Yeh thatβs still savings. I have a pot for bills that donβt get paid monthly (quarterly, 6 month or annual), ie your car maintenance and holidays. Then seperate pot for emergency fund.
Savings for me are my main savings account. The car one is to spend and the holiday one is to spend so I donβt class them as savings.
For me, I split things into necessary expenses versus indulgent optional purchases.
Putting money aside for car maintenance? That’s more of a necessary expense, so I wouldn’t count that as savings. Budgeting for a holiday? That’s savings.
I personally wouldnβt consider the christmas and car money as savings, itβs really just money you have earmarked for later. But, itβs good to set aside money in advance for those things.
Also a 6 month emergency fund, pension contributions and 12% savings rate is pretty good going.
Any money already committed but put aside doesn’t count towards my savings. I do the same as you: put money aside for car maintenance, holidays, repairs etc. I assume that money will be spent.
My “net” savings are only money that it is not allocated for anything.
Personally savings is just whatever I didn’t spend that month. But I’m not really a budgeter and just pay expenses out of whichever months salary it is. I have an emergency fund for if there are any major lifechanging emergencies, but I don’t consider that savings.
I have everything on a spreadsheet and count things like mortgage overpayments as savings as they impact my scope for future monthly savings and capacity to pay extra into my pensions. I put things on 0% credit cards and add the difference to savings and other investments then pay them off when the deal is about to end. I have cash and s&s ISAs, and some other things like stocks and bitcoin etc. I have a monthly target for current account balance and I move any surplus to something I’ll get a return on the day before pay day. I basically consider all of this as contributing to savings.
Numbers I am most focused on are 5 year projected total which includes mortgage and property value, and available instant liquid total. In other words, how much will I have if I pay my mortgage off, and how much have I got right now if something catastrophic happens.
It’s all DIY so I’m probably making huge mistakes somewhere.
For me anything thatβs left over at the end of the month is savings
Regular spendings, whether it be weekly, monthly, or yearly would not be savings in my eye, but I understand why some people would see it as that. For me, savings are X amount each month that I put away in an ISA and don’t even think about.
The way I do it is year by year. In my finance app I have my income for a year against all my spending for a year (bills,car, insurance, mortgage, presents, misc outgoings, savings etc).
After a year, total income – expenditure = 0. Regular monthly expenditure (e.g. mortgage) tracks nicely month by month. For one-off expenditure like car insurance, if it comes out towards the beginning of my ‘year’ then I’m essentially using the rest of the year to ‘pay it off’. If it comes out towards the end of my ‘year’ then I’m building up that money to pay it. Either way, at the end of the year it’s the same.
If you work this way, then you don’t need separate accounts for things like holidays as it’s there in front of you in numbers. If, for example, you have saved Β£2k for a holiday in a year but not spent it then you can just move the numbers forward to the next year so the holiday pot/category (whatever you call it) starts at 2k instead of 0 for that year.