Budgeting Basics (Part 5): Your Savings Bucket

Budgeting Basics (Part 5): Your Savings Bucket

Don’t you hate it when you are cruisin’ along, rockin’ your awesome budget for the month and you get blindsided by unexpected expenses?! Thing like birthdays, Christmas and anniversaries pop up out of NOWHERE and surprise you! Now your perfectly normal month just got turned upside-down by all of these different occasions. I can’t believe the nerve of some people, being born and celebrating it on the SAME DAY, EVERY YEAR. What’s up with that? Anyway, if you find yourself in this situation, no need to fear, because you actually already planned for it. Wait…….you did plan for it……right?

What Is A Savings Bucket?

When you have an expense that does not re-occur every single month, you sometimes forget that it’s coming up and thereby you don’t have any money planned for that expense. Examples of these types of expenses are; Christmas, birthdays, anniversaries, car maintenance, vacations and bills that you pay every other month or every 6 months. These expenses can be expected to happen throughout the year (most of them at the same time every year), but for some reason there is a cognitive block around remembering to have actual MONEY available to pay for these things. That’s where your Savings Bucket will come in.

A Savings Bucket is a savings account with money set aside for each of these categories. In Part 3 of the Budgeting Basics series, we talked about setting goals and how to reach them every time. You come up with an amount that you would like to save by a certain date and reverse engineer it by figuring out how much you need to save per month to reach that goal. I suggest you put this money in a savings account and keep track of it by category. I have a spreadsheet that helps me track each deposit into my savings account and splits it out by category, so I always know how much I have saved for each item.

Here’s an example of one of my savings bucket categories:

Date Bday/Anniversary Amount
1-Jan January  $           50.00
1-Feb February  $           50.00
14-Feb Vday  $         (50.00)
1-Mar March  $           50.00
1-Apr April  $           50.00
17-Apr Michelle   Bday  $        (150.00)
1-May May  $           50.00
1-Jun June  $           50.00
1-Jul July  $           50.00
1-Aug August  $           50.00
2-Aug Anniversary  $               –
31-Dec Jake  $               –
 Current Total  $       200.00

I save $50 a month in this category which pays for Valentine’s Day, Michelle and my birthdays and our Anniversary. You can see when the event shows up, I just transfer the money that’s already there into my checking account and SPEND IT. I never have to worry if I have the money for any occasion because I have anticipated the need, set a goal and saved up for it. AND THAT’S IT!

Phew! That was easy. I suggest having a savings bucket account that you dump all of your money for these categories in and then you can just keep track of it in excel. If you are patient, I will upload my budget template spreadsheet soon and walk you through how to use the “Savings bucket” tab to keep track of all of these categories in one account.

Let’s Review

Thank you for reading through the Budgeting Basics series. I LOVED writing this because it’s how my wife and I changed our financial future for the better and I hope that anyone reading this can do the same. This is by no means an exhaustive guide on budgeting, but I wanted it to be a great starting point to get people talking about their finances and really considering how they handle their money. Let’s review what we’ve covered in this Series:

Part 1: Laying Your Financial Foundation

In part 1 we talked about writing out your priorities, which will help guide how you make decisions about where your money goes.

Part 2: Tracking Your Income and Expenses

In part 2 we detailed how to track your income and expenses, allowing you to see exactly where your money has been going for the last few months.

Part 3: Setting Up Your Budget and Reverse Engineering Your Goals

In part 3 we went through how to set up your budget on paper before the month begins and talked about goal setting.

Part 4: Why You Should Get a Month Ahead

In part 4 we talked about getting a month ahead on your budget and the freedom it allows you.

Part 5: Your Savings Bucket

And finally, in part 5 we talked about how to utilize savings buckets to ensure that you always have money saved up for those “unexpected” occasions.




Comments: For those that have completed the budgeting basics series, how does it feel? Do you feel more in control of your finances and ready to take on the world? For those who haven’t, what is keeping your from doing a budget? For those that have been on a budget for years, did you gain anything from this series? I would love to hear your thoughts and insights on how this works for you or how it can be improved. I am constantly learning as well, so let me know!

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  1. I should create an account like this – that has holidays and birthdays and unexpected but not emergency expenses all rolled into one. Recently my professional association emailed me to let me know that I have to renew my membership – luckily I still get the student rate at $70, but it’s still unexpected and it will have to come out of my money allocated to savings. This type of account would help!

    • Daisy, you should! It is one of the coolest things we’ve done to help us save up for those expenses. I have an excel spreadsheet tab dedicated to this account, so I throw all the money into one account, but keep track of each category I’m saving for in my budget. For birthdays and Christmas, we actually write all the names down of people we’re buying for, put them in order of date and then allocate a gift budget for each. We then save a certain amount each month to ensure we always have the cash on hand when the occasion comes up. It helps to not interrupt our regular monthly budget and we just forget about it until the times comes to use that money.

  2. How do you track this and do you keep it in one account? I’ve got an allocated savings account for various annual expenses and I track with basic excel sheet.

    • Brent, I keep track of everything in one tabs of my excel spreadsheet labeled “Savings Buckets”. That way I just need one savings account to dump all the money into, but it’s all split out on the budget. Sounds like you have a similar thing going on. Don’t you love the power of Excel? 🙂

  3. So hey….are we twins or is it just that saying that great minds think a like? I have envelopes marked with “Christmas” “weddding” “gifts” and all that. That way I can do the budget for them months ahead of time and not worry about it eating away at other expenses. For instance, I had a wedding I attended. It was so easy to just grab the money from the account a few weeks ahead of time and not have to worry about it! Granted I’m just starting out but yeah, I love budgets and things like this. I keep track of my accounts in excel.

    • Haha. We must be siblings! We have loved using these funds because, like you said, you don’t end up spending this money elsewhere because it’s earmakred for these occasions.

  4. I still don’t budget for property taxes, license fees, car inspection fees, etc. I really need to start because not doing so causes me to blow my budget. And that ain’t good.

    • Haha, you definitely should! It’s always those expenses that don’t recur monthly that seem to show up out of nowhere and blow the budget. I’m hoping to get my budget template prep’d and ready for download soon, so you can cop that and use the “Savings Bucket” feature to save up for those expenses! Thanks for dropping by 🙂

    • Pasadena says:

      Hi Shawanda,

      Do ! Even if you think you don’t have enough right now. Budgetting for those has a nice side effect too : they don’t come as a surprise anymore, because you see them all the time and don’t forget them.
      Just a few bucks per month to start is good. If it doesn’t cover them all, it will at least cover one or two, or next year’s.

  5. Pasadena says:

    hey I think i must be another one of your twins. I also have an account for that, where I save $250 a month by direct deposit. It’s supposed to cover non-monthly expenses, like home insurance, hair dresser ;-), contact lenses, and a few others that I can’t remember right now. I’m calling it Sinking Fund, but I think Savings Bucket is way nicer.

    I used to use it for the cats annual vet visit too, for my cats who are never sick, but one of them proved me wrong and got sick last month and it cost me an eye. Wow, are vets in the US expensive ! So I opened a new Critters Fund where I plan to save up to $2000 (nowhere near that right now).

    • Pasadena, isn’t it great? It’s a crazy concept to people when you tell them to ACTUALLY HAVE THE MONEY before your spend it, but it’s so nice.

      Sorry to hear about your cats 🙁 It’s great that you are anticipating the expense, though, because now your “Emergencies” are just going to be a minor inconvenience. Thanks for dropping by again!

      • Pasadena says:

        Thanks. I used to save for the annual checkup and vaccine, but my cat just stopped eating and drinking for a few days and ended up costing me more than $650. And I still have no idea what the problem was. In my country it would have cost less than 100 Euros. So… they’re getting their own EF now ! Learning 😉

        • Wow, 100 euros is SUPER cheap for vet care! Well, now you know and won’t have to worry in the future when something comes up. Plus, who wants to worry about if you can afford to save your pet or not because of money?!

          • Taylor Saffire says:

            What are your thoughts on using your saving bucket as a Whole life insurance policy…its liquid, tax free, flexible after the 1st year and also comes with a protection for your assets and spearheads a great estate plan? It is not necessarily immediate but 1-3 years it can turn into a great increasing bank for you…thoughts?

          • Mostly, I don’t like people collecting fees on my money. And WL insurance seems to do a LOT of that. I would rather use the ROTH IRA as a backup fund if needed, but the goal here is to save actual money (cash) for irregular expenses.

  6. Thank you for putting this series together. I am currently working through it all. Where would medical expenses ie co-pays, meds etc fall into? Where would this be categorized in the budget – Expense column or part of the savings bucket?

    • It depends. If it’s a non-monthly expense, then I’d create a savings bucket so the money is there when you need it. If it’s monthly, I’d put it in as an expense.

      Glad you’ve enjoyed the series, have fun managing your money like a BOSS!


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