One of my friends, Johanna, recently suggested that I write about how to manage saving when you have many goals toward which you are working. I thought that was a fantastic idea, given the fact that it has taken us awhile to work out a good system for ourselves.
In a perfect world, you would be saving for some/all of the following at any given time:
Emergencies (only what is truly unpredictable...what is listed below here is expected)
Health insurance deductible amount
Repairs & maintenance
Those are just the most common examples. You could have an educational goal you are working toward, a professional goal, or a downpayment for a home, just to name a few. For me it was/is way too complicated, and not realistic, to have a separate account for each goal, which leads me to my story.
When Drew and I started dividing our savings into categories back in 2012, we used actual physical envelopes. Every month we would sit down to budget and decide where any "left over" money was going. We would withdraw the cash and put it in the respective envelopes in a safe in our house. Most of the categories weren't going to be there long enough (like car repairs...) to gain more than a few cents in interest anyway, and I really liked to experience the tangible and visible progress.
Envelopes we used to use for saving...featuring my stunning artwork
Our system was challenged one bleak August day in 2014 when we were traveling for a Timber Framer's Guild conference in Manchester, NH (before we knew we would move here!). We had decided to drive our own car, my 2004 Jetta, in order to "save money" on a rental. After the conference, I was absolutely determined to see the New England coast and dig my toes in the sand. We made it all the way to the street before beach front when my engine blew.
After we were towed to a shop in Ogunquit, ME (and then Kittery), we had three days with a rental car. We were able to explore around and spend some time with great people in the timber frame family, but really spent most of the time at coffee shops so I could work as well as looking for ways to acquire the funds necessary to pay the mechanic. The problem was that all of our repair funds were in a safe in our house! We tried every way we could think to get money to pay him, and ultimately opted to have our friend, Michael Mabry, break into our house and get the cash to deposit for us. We then wrote a check to the mechanic, hoping the deposit would process before he cashed it.
The problem in this story is the logistics. It was not, however, the lack of savings. If we had not prioritized setting aside money each month for situations such as this, we would have been in an even bigger pickle than we already were.
The question becomes, how do you separate all of your funds for savings? If you want to get the max that you can out of a "short term" investment (you think you will need it within a year or two), it should be in something like a Money Market or high interest savings account.
It would be ideal if savings accounts had "folders" in them, but that doesn't exist to my knowledge. Or to use one high interest account in which to transfer everything you are saving in any given month, after which time you would tell your budgeting software what was encompassed in that deposit (i.e. $100 to replacement vehicle, $50 to Christmas, and $500 to downpayment). The problem there is that even though mint.com has a great goal-setting feature, you have to have a separate account to connect to each savings goal. I just started testing out YNAB, but I haven't been able to figure out if this is possible using their platform.
For the majority of people, I think the best way to do it is to use a Google sheets, so that it can be accessed from any device. I have attached an example spreadsheet here for your use. It would be as easy as taking two minutes to update the sheet each month when you sit down and do you budget. That way, if your savings account has $5,000 in it and you need to access some of it for one of your savings goals, you can reference the sheet and determine how much of that $5,000 you have earmarked for that purpose.
One more tidbit--I have noticed that my clients who are the most successful with saving have it completely automated. They may have a certain amount automatically pulled from their paycheck and deposited into savings, or they may use apps like Acorns. However, I know what it is like to be so tight in your budget that you can't predict what cash you will have available until you are in that budget period, and it may fluctuate each month. In that case, choosing/entering your amount manually each month is the best way to do it.
I'm really interested in how everyone else does this. Please let me know as I'm always looking to update my system!