Today I am going to embrace the "tacky" and talk a little bit about money. Money has been a huge topic on my mind lately. And while most of us grew up learning that it is rude to talk about money, I think that it is incredibly important to learn how our young adult peers handle their finances in order to figure out what works best for you. In the past 6 months, Ryan and I have purchased a house, purchased a ton of new furniture, and dealt with some unforeseen emergencies, including some expensive vet bills when Lou tore her shoulder and an urgent need to buy a new car. Because of this, we've had the very adult experience of building up our savings, blowing through our savings at lightening speed, and starting all over (nearly) from scratch. Today I'm sharing a couple of my tips for how we prepared for these events and entered into what I am lovingly calling "the recovery period."
1. Manage Your Savings Account One of the things I was most shocked to learn the few times I've discussed money with friends is that not everyone our age has opened a savings account. On some levels, I get it. It can be intimidating to have another account, especially if you anticipate it sitting somewhat empty. I am so fortunate that my parents had a savings account open for me from the time that I was little. I can still remember my mom helping me from a very young age to deposit a portion of my birthday and Christmas money each year into my savings account. While I certainly didn't understand or appreciate this when I was younger, those sorts of little savings over time add up, and I was pleasantly surprised with the outcome whenever I began to play a bigger role in my personal finances. The moral of this story is that it doesn't matter how much you have to save - even if it is just a little bit here and there, having a dedicated place to store it is essential!
2. Embrace Having Multiple Accounts Between my personal accounts and my shared accounts with Ryan, I have a whopping 6 bank accounts to my name. Before you think I'm completely insane, this is pretty standard for the way that my bank handles things, and while at first I thought this was a bit much, I have come to totally embrace the freedom and flexibility it gives me. Top priority are my shared accounts with Ryan - we have joint spending, reserve, and savings accounts. The first bit of my paycheck is sent directly to our savings and my 401k through direct deposit. The second bit goes to our spending. Then, each paycheck, I budget out the expenses we have coming in the next couple of weeks weeks and allocate a significant portion to be moved to our reserve, which is exclusively used to pay our mortgage and bills. Anything leftover in spending is used to pay for groceries, household items, and entertainment. In addition, I also have a personal spending, reserve, and savings account. A much, much smaller portion of my paycheck goes to my personal spending account, and I move it into spending, reserve, or growth depending on what is coming up in the near future. This is the account I use if I want to buy clothes or if I'm buying gifts for Ryan. It's my own personal judgment-free allowance I give myself every few weeks. It may seem like a lot, but with the beauty of direct deposit and constantly keeping an up-to-date budget, I'm able to save and allocate my money down to the detail.
3. Always Have a Buffer One of my goals is to always have a buffer in my savings account. That means that no matter what I'm saving for in the future, I never let myself touch that buffer amount because it is there solely for emergencies. Even after I've made a big purchase, that buffer should still be there. And boy, did that buffer come in handy recently. As you can imagine, after buying our home, our savings took a serious drop, and we certainly were not planning on making any other big purchases anytime soon. However, life happens, and one of our cars was totaled, which meant ready or not, we had to buy a car. Thanks to our buffer, we were able to swing it. And here comes the tacky again: We like to keep a buffer of at least $5k at all times. That may be way too high or way too low for you, but that is what works for us at this stage of life.
4. Create Savings Goals This includes long-term, short-term, and in between goals. Usually I have several short-term savings goals and maybe 1 or 2 long-term. Short term saving goals for me are typically house/decorating or travel related. Since we have gone through some big expenses lately, I'm currently working on redefining on our long-term goals, but probably the next big ticket item in the works is a new car for Ryan. He'll be happy if he reads this post!
Do you have any money tips that help you to plan and save?