Start Saving Already

I get frustrated when experts tell us to put aside 10% to savings or "even just $10."  These are usually the same people telling us to assign every dollar.  So what is the assignment for the $10?  There was never any motivation there for me to save anything before I was completely out of debt, and I literally had enough money left at the end of the month that I felt stupid NOT moving it to a savings account to earn some interest.

The term "emergency" fund was even worse, for me.  The guilt at using that money!!  Who and what defines an "emergency"?!?   Your car insurance came due and you didn't have the cash?  This isn't an emergency, you knew it was coming.  You want to drive six hours to spend Thanksgiving with your family?  Again, NOT an emergency! And now they tell you "oh, not just $1000, but $3000, or 3 months of living expenses, or six months, or a year!" 

I believe the biggest reason I did not start fully funding my retirement account as soon as I got out of debt was that I felt every penny needed to go into savings, for the emergency fund, and any time I USED any of MY money from savings, I felt guilt.  Lots and lots of guilt.

Eventually, I adopted a "Christmas Club" mentality to savings.  I have only a small emergency fund these days, but in my savings account I have money labeled for just about every possibility I could think of.  Most important, this allows me to spend MY money, guilt-free, on the items I have saved for.

I took off, for two weeks.  Drove across the country.  Ate out, shopped, wasted fuel.  Guilt-free, because the money came out of my "travel" money and my "home decor" money and my "clothing" money.

It's like the envelope system for those of us who like earning interest.

If you're not saving, or you're only putting money into your "e-fund," read on:

January is almost over.  On February first, 2011 will be 1/12 of the way through.  More than 8% of this year will have flown by and yes, it is far enough along to look at your goals for the year.

I don't care if you are still in debt, just out of debt, or well into your life of savings, you should sort out your "Christmas Club" donation and start it, now, while there is still time to make your January donation.

I say it's not just for Christmas, because I use it as a savings plan for all the crap that hits us all at the end of the year. 

How much money did you spend on non-budgeted items between Halloween and New Years in 2010?

Candy and decorations for Halloween?  Costumes?  Thanksgiving food? Food for the work potluck? Travel? Cards and postage and decorations and lights and electricity?  Christmas trees and Hanukkah candles?  How much was your Festivus pole?  More food for home and cookies and more potlucks and parties and new outfits and nights out and travel, and travel.  And travel.  Increased daycare and babysitter's fees when the kids are not in school but you are at work?  Donations and "tip bonuses" to everyone from the doorman to the hair salon?  Oh.  And gifts. Don't forget gifts.  Along with wrapping paper, bows, more cards. (aka "gift tags")

I am a cheapskate who buys Christmas cards in January from the $1 pile, with no children to buy for, and I still have to budget what is basically a week and a half of take home pay for the holiday season each year.

If you are not setting money aside SPECIFICALLY for the last 2-3 months of the year, you will not feel happy financially on January 1, 2012. 

You might not go in debt over it.  You might just feel like you had to use savings you didn't want to spend on that.  You might, as I have done in years past, empty your emergency fund to buy presents and feel horribly guilty.  Or you might choose to participate in none of the money-sucking activities and just feel a bit guilty about that.

So how do you make sure you end 2011 on a good note financially?  

Do a rough add-up in your head and decide how much you think you spent.  Some people might spend less then I do, many others spend much more.

So, mine is $700 per year.   $700 divided by 12 is roughly $60 per month. 

So I need to set aside $60 per month to make the holidays how I want them.  Just over the cost of one tank of gas for me, roughly.  I can do that, without even noticing. I take it out automatically the day after I get paid.

If you look at the number and you CAN'T take that money out every month and still survive, you spent too much on the holidays.  Sorry.  Save what you can and think about cutting back on the cards or the travel or the food or the presents (or a bit of all of it) next year, until you're back on track and have the money to buy the things you want.

So that's all there is to the Christmas Club.  

Once you get into the habit of focused saving, you can find other things to save for. 

I don't have a car payment, so I put $200 per month into the "new car" fund....admittedly, this is the fund that I neglect to pay whenever the monthly budget looks tight, but I have still managed to put enough away that if my car dies tomorrow I can at least get "something" that will run.  Every month that goes by puts me a bit closer to a "decent" car.  If my beloved Aztek holds out for long enough, I'll have the cash for a "nice" car. 

I also have a wardrobe fund for the day I reach my elusive "goal" weight (robbed regularly for tops that look cute in my "now" weight!), and a home decor fund - which I somehow justified purchasing a new computer with earlier this year.

Every person is going to have different funds and different time lines, which will determine how much you set aside.  I set different "maximum" amounts, as well.   I want $20,000 in the new car fund before the Aztek dies, but that doesn't mean I am trying to put away $1,667 per month! 

Assign your money to your goals or your run-of-the-mill expenses.  Put $5 per month into your "trip to Australia" fund or $100 per month into your "visit Teresa" fund. 

Just start saving already!