My Saving Strategy

I spent last week telling you why I hate the word “budget”—so much that I refer to it as The B-Word. I also uncovered that I’m not the best budgeter in the world. Instead, I rely on my saving strategy to keep me from living paycheck-to-paycheck.

IMO, The number one way you know you’re living paycheck-to-paycheck is if you’re not saving for your goals.

It’s true. Actually 46% of millennial women (30% of millennial men) making six-figures are living paycheck-to-paycheck, according to a LendingTree survey. Why is this? It could be because of decisions they have made in the past that are catching up to them (cars, homes, student loan debt) or it could because they have chosen to live a more expensive lifestyle. Either way, they most likely aren’t planning and saving, and that is where we fall short and start living paycheck-to-paycheck.

So this is what I do to make sure I’m never part of that statistic. (You know, as I prep for that six-figures and beyond… because we all gotta have that rich bitch money mindset!)

I save for my goals, pay the big things like rent, utilities, and insurance, then the remaining balance is left up to me to spend on the things I’m really bad at budgeting like restaurants,, and coffee.

No matter what, I live below my means by saving for my goals and paying the big expenses first.

So how exactly do I do it? Glad you asked.

Here’s the dish: I have 7 Savings Accounts.

I’ll to give you time and space to gasp and maybe mini-puke in shock.

That’s right, I have 7 savings accounts. And it’s super easy for you to do this too. Most online banks, like Ally Bank (my personal favorite), allow you to open up as many Savings Accounts as you want. This is great for me, because it allows me to save for individual goals and track my progress without everything being all jumbled together.

Here’s how it works: Each month, when I get paid, I first* always save 10% into my true and honest save-save account. (The first one listed, below).

I then take out my large fixed (or estimated variable) expenses for rent, utilities, groceries, insurance, and the like, and put that total amount into the checking account where I pay all my bills.

The remainder of my money goes to my 5 other savings accounts to fund my goals, hopes, and dreams—and burning need for a giant magenta armchair—with a little wiggle room of fun money left over.

The fun money gets put into my checking account (the same one I pay my bills out of) and I use it for coffee and tacos. You can use it for your greatest passions too.

*Well, really I save for taxes first, then my save-save, but this only applies to you if you’re self-employed.

Here's the breakdown:

I’m going to tell you exactly what my 7 savings accounts are for (and what they are nicknamed) so you can copy my exact saving strategy.

  • Online Savings Account (OSA) – I think I should really change the name to my “Oh Shit Account.” This account holds 3-6 months (or 6-9 months, depending on how marketable you believe you are) of current life expenses. That includes rent, utilities, insurance, gas, food, cell phone, internet, gym membership—whatever is such a high priority that if you couldn’t afford it and had to give it up you’d probably have to move somewhere new to make a new life for yourself.  Make a list of your monthly expenses like this, add them all up, multiply by 6 (that’s my number, you do you) and that is the level of money you need in your OSA. When you start saving into your OSA, don’t ever take the money out, unless it’s an OSM (Oh Shit Moment) like you lose your job or your car breaks down. Fund that bad boy until you’re at your goal then no-touchy, okay?!
  • TAXES(!!) – Because now that I no longer “work for the man,” I have to pay taxes myself. Womp Womp. Fun fact: this account has the most amount of money in it right now. I’m an over saver when it comes to taxes because I don’t want to be royally fucked when the time comes. I didn’t pay quarterlies this time around because I’m still trying to decide if it’s worth it (which is another in-depth nerdy post in and of itself) so I had to save for the whole 8 months of “self-employment” for 2015.
  • Automobile – For reasons I can only understand, I like to pay my auto insurance in full, every 6 months. So this savings account I use to save up for that big payment because it’s hella expensive to have a car in the City of Chicago. I also save for other major expenses that are predictable and unpredictable throughout the year like registration, oil changes, city stickers, maintenance, etc. Add up your expected amounts for these annual expenditures—divide by 12 and every month fund your Auto account so you aren’t shocked and penniless when that big bill comes.
  • Weddings and Gifts – I’m 24, which may seem young for someone to have a lot of weddings to go to, but you have to remember, I’m from Iowa. (Is that mic droppable? Probs not.) Regardless, we’re getting to that age where our friends are getting married or mom and dad are really starting to expect gifts around the holidays now that you have a real job. But remember, gifts cost money, and shipping + gift wrap is extra! Start saving just 2-5% of your paycheck each month so when that time where your end-of-year-bonus would really come in handy (**cough: Christmahanakwanzika), you’ll be ready to roll.
  • End of Year Retirement – Again, because I’m newly self-employed, and this is my first tax season, I’m saving money for end of year retirement (for a Roth IRA because tax diversification, yo) in a savings account just in case I’ll need it for taxes. Can you tell I used to be an actuary? But in any other instance, this is the account you may or may not already be funding, and you probably didn’t realize that it’s part of a stellar saving strategy (congrats!). It could be your 401(k), an IRA, or a Roth IRA (or all 3!). Just keep telling yourself that saving for retirement is sexy.
  • DOH! Moments – We all make stupid mistakes, and sometimes those stupid mistakes cost us money. My number one stupid mistake? Parking tickets. (Again, having a car in Chicago is EXPENSIVE and confusing for the first 2-3 years. Huge learning curve.) With parking tickets in this city tiptoeing around the $60 range, I never used to get a kick out of cutting a check to the City of Chicago for the price of a steak dinner. But then I started pre-saving for these moments. So now when I walk out to my car and tear the orange sucker off my windshield, I laugh maniacally, and say “No big d, I was expecting you.” I then transfer the $60 from my “DOH! Moments” account into my checking account and write out the check to my favorite city in the world.
  • Home Décor Account – This is my newest account. I have a problem. I don’t really shop and it’s because I’m a super saver; however, I’m beginning to form an obsession with home décor; though, I’ve realized I have expensive taste for art and furniture. Aside from being obsessed with pricey home décor, my true problem is that I’ll walk into a store, see a piece I love, and talk myself out of it by saying “nah, too expensive.” Enter, my Home Décor Account. I decided to start a savings account where each month I put a chunk of money I might otherwise spend on clothes and cheap shit into an account that’s only aloud to be spent on home decor. This way, when I go out and see a piece I love, that might otherwise be out of my “impulse” price-range, and I try to talk myself out of it, I know I have pre-saved for this very purchase. Once I swipe my card for the piece, I go into my bank account, transfer the cost from Home Décor to Checking so the money is there when I go to pay off my credit card. Wala! Making shopping for pricier items more affordable.

If you have a hard time living below your means on other categories, like Restaurants, Clothes Shopping, Concerts and Raves, Dental Care, or <Insert Other Random Obsession Here>, go ahead and create a savings account and start funding. Fund each goal based on how you prioritize it using a percentage of your income, just remember to allow yourself enough money to live on month-to-month—I know how addicting saving can be.

So, I want to know, how do you save for your goals? Will you adopt this saving strategy for yourself? What goal accounts will you set up and what will you name them? Let me know in the comments!