Boy, am I grateful for our targeted savings accounts this month! We have spent a crazy amount of money this month, some of it unexpectedly.
This month we have used our targeted savings accounts to purchase our Christmas flights ($625.20), six months of car insurance ($405.47), and other miscellaneous items ($149.85). All of that was planned and budgeted for so even though it was a lot of money it wasn’t stressful at all. Actually, we have also been expecting to spend even more as Kyle may buy a smartphone at any point (as soon as he picks one!), which will be a few hundred dollars out of pocket.
Then, last Saturday, our car – our only driveable car – failed its yearly safety inspection. Two of our tires needed to be replaced within the next 60 days.
Thankfully, we did have a bit of notice on this. Before we drove to Chicago last July we got the car looked at and were told that two of the tires would need to be replaced within the next year. Kyle said he was tired of buying only two tires at a time, though, and we decided that we would replace all four by June 2013. We increased our savings rate to our Cars savings account to prepare for that eventuality. So even though we now have to replace the tires earlier than we wanted to, we were forewarned and were able to save up part of the money needed.
With the tires, alignment, and inspection fees costing $552.75, we are up to $1,733.27 coming out of our targeted savings accounts in just three weeks – over 40% of our net monthly income! There is no way we could have cash flowed all the auto work, insurance, and our Christmas flights in the same month, let alone consider purchasing a smartphone, if we weren’t putting away some money aside every month for irregular expenses. In that sense, I’m still completely in love with our targeted savings accounts.
However, it is becoming more and more difficult to employ the short-term targeted savings account strategy because of the impending uncertainty in our lives. Once we crossed the one-year-until-expected-graduation mark for Kyle, the expenses that we would have one year out started fuzzing out. For instance, for the last several years we’ve bought season tickets to the Broadway musical series at our local theater, but with Kyle probably leaving town it’s doubtful that we would be able to commit to such a series. However, that doesn’t necessarily mean our Entertainment costs will go to zero in place of that series.
I think this looming uncertainty make divvying up our savings into all these various pots a little silly. I think that Cars, Appearance, Medical, and Charitable Giving will be stable, and the volatility I see could be fairly easily adjusted for on the fly. But I can’t really say how Travel, Entertainment, CSA, and Electronics will change or even trade off with one another, and Travel and Entertainment often require large purchases that take months to save for, so being myopic is not an option. It’s worth it to consider getting rid of these individual silos since we can’t predict expenses in them well anyway, and just keep saving at the same rate to our general/nest egg savings account.
My conclusion is that short-term targeted savings has worked very well for us while our lives have been stable and expenses were regular and predictable, and I often recommend this type of strategy. But now that our future expenses are more difficult to predict, the artificial barriers we’ve put around various pots of money may start to work against us as large, harder-to-predict expenses start cropping up. I have also gained confidence in our ability to save our budget leftovers instead of blowing them on treating ourselves, so we may not need the motivation of many empty, named pots now to motivate us to save like we used to when we were less disciplined.
The possibility of dismantling some of these accounts is definitely something we’ll discuss in our budget meeting this month!
Have you changed budgeting strategies during your life (aside from none to something)? How do you save through times of transition? How far out do you try to predict your irregular expenses?
photo from Free Digital Photos