I learned this trick when we were getting out of debt. I am not the one to write down every little expense that I make in a register to where I can tell if I am meeting my budget or not, so I take this different tactic and it works for us. I have talked about this before a bit, but wanted to dive into it deeper here. We have an account setup at Capital One 360 (Which used to be ING Direct). Honestly, I liked it more when it was ING Direct. I don’t know if it was all the orange that they constantly threw at you or maybe they were just more fun!… Nonetheless, we stay with Capital One because the nuts of bolts of what they offer still works great.
The Automatic Savings Plan with Buckets
So here is what we do. We setup frequent and “automatic” withdraws from our main checking account which is where our pay checks are deposited. Since both of us work, we ultimately get 2 pay checks coming in and the beauty of it is that they come in opposite of each other. It means we get paid every week, which is great for budgeting purposes. So each week we have a set amount that comes out the day that our paycheck is deposited. We have created savings accounts at Capital One 360 for each expense that we need through out the year. These are our “Buckets” of money that by the time the expense comes the money just magically builds up just in time to pay for the expense. Here is the break down:
- Vacation Fund $75 Per Week – We like to take at least one big vacation every year
- Insurance Fund $120 Twice a Month – This includes both home and car insurance
- Emergency Fund Maintain at least $1000 for unexpected expenses
- Christmas Fund $230 Twice a Month – We have a bunch of people to buy for including our kids for Christmas
- Thanksgiving Fund $50 Twice a Month – We host thanksgiving at times plus we have a tradition of staying up in Cleveland every year for the lighting of public square
- July 4th Fund $25 a Month – We like to throw a summer party every year with family and friends
- Easter Fund $10 Twice a Month – You know the Easter bunny needs to come every year 🙂
- Real Estate Taxes $500 a Month – This is a big one for us where if we didn’t have this, it would likely derail us twice a year
- Water Fund $10 per time – This is a fun one we established where if we go out the eat and decide as a family to just get water (instead of pop), we would transfer $10 because we not only saved money by not buying $2.50 pops times 5 people, but it was also a healthier choice.
- Birthdays $15 per week – With our large family, we celebrate at least a birthday every month, sometimes many more. This help to offset any birthday months where we have multiple birthday parties to attend to. As the kids have gotten into school, this has become even more frequent with their friends inviting them to birthday parties.
- Weddings $75 twice a month – Here is my thought on this. I have 2 daughters 9 and 6 years of age and 1 son at 13. They are eventually going to go get married and want a nice wedding. This is major expense for the parents so this is my attempt to plan ahead and prepare for this.
- Summer Camp $50 a week – Our kids go to day care for before school and after school, however during the summer sending 3 kids to day care or summer camp becomes much more expensive because they are all day programs. This is out attempt to offset this expense through the year.
- School Clothes $50 Twice a Month – Every year in the fall the kids go back to school. They are a year older and a year taller and in need of new clothes. This is our attempt to offset this year round so that when the kids go back to school we can properly cloth them.
- Snow Plow $20 Twice a Month – You may say Drew, what gives can’t you shovel your driveway? Well here is the deal. I absolutely can but its a big driveway. We live just southeast of Lake Erie and if you ever lived up here in Northeastern Ohio you will realize that you can get 2 feet of snow dumped on your overnight. No snow shovel will effectively dig yourself out of that mess to make it to work. Hence the “bucket”.
So the magic here is that once you have all this setup, the “bucketing” program just works on auto pilot. As soon as the money comes into your account from your paycheck, it goes right back out to these bucket funds. That way, you get comfortable with the amount of money that you ultimately still have in your account and when expenses arise the money is already in the account to pay for it. I am sure I could have a few more “buckets” to consider here, but looking for your feedback to see what I may be missing.
What buckets do you have in your plan?