How to Prioritize Your Savings Accounts

How to Prioritize Your Savings Accounts

How to Prioritize Your Savings Accounts | brokeGIRLrich

I am a list maker and a goal setter.

How else do you achieve things if you don’t know what you want to achieve?

I’ve never actually been a huge fan of New Year’s Resolutions, but since I started blogging, I’ve used that as my time each year to reassess my financial goals and sort of start the clock over on each one.

The vast majority of my financial goals have always been saving related. Right out of school, there was also the big goal to pay off debt. My financial planning started out really easily – there were three tiers.

  1. Save for retirement (max out IRA/at least meet any 401(k) match amounts from employers).
  2. Build up an emergency fund to $1,000.
  3. Pay off all my student loans.

So I split up $5,000 and figured out that each month I needed to save $416 for my Roth IRA, and because of the power of compound interest, that has always been my highest savings priority. When things are slow and I fall behind, it’s also the account I put the most effort into catching up on. When things are good and I’m a little flush, it’s the account I add extra to in order to make sure that it gets maxed out each year.

To get my emergency fund from zero to one thousand took $84 a month. That baby emergency fund saved my butt many a time from adding more credit card debt because of car trouble, health insurance co-payments, dental visits, etc.

My final priority was my student loans. All of my extra cash would go towards these. It wasn’t uncommon for me to make minimum or just beyond the minimum payment each year for a few months until I had my Roth IRA maxed out, but after that it was a free for all on this sucker.

I’ve spent a lot of time this summer thinking about my savings goals now and how to prioritize them, because I didn’t make enough money all summer to meet my monthly goals on most of them.

Fortunately, debt isn’t in the picture anymore, but now that I’m in my early 30s, I have several more short and medium term goals that I’m saving for in addition to retirement.

  1. Save for retirement.
  2. Build up an emergency fund to $10,000.
  3. Buy a new Macbook with cash in February/March 2016.
  4. Buy a new car with cash in 2022.
  5. Save for a down payment on a house.
  6. Invest $1,000 in the stock market.

Thanks to the fact that I still do the same thing with paying as much into my Roth IRA as I have extra, I’m only $800 short for the year and will probably finish saving for that by the end of September, beginning of October. Although most years I’m done by summer.

It was the rest of the savings goals that I had to reevaluate and I decided to prioritize the Macbook goal since it’s coming up the soonest and some of my income comes from my computer in the first place. So every month I managed to scrounge up the $100 I’ve aimed to put in that account (generally using the money digit has been siphoning out).

The other good month this summer, a $100 was added to the new car account.

Make ListsThe thing I found most helpful in prioritizing my savings goals when I’m not making enough to meet them all was knowing what date I want to achieve a goal by.

The dates that are the farthest away provide me with extra time to catch up and still make the deadlines.

I also didn’t just let go and figure out that I won’t make the goals. When I knew my financial situation was going to change for 4 months this summer and then change again in the fall (which I didn’t really know back in January when I set the goals), I reassessed them all to make sure they were still doable.

With a little bootstrapping, good luck and good budgeting, they just might be, so I’m not letting go of these goals yet.

How do you prioritize your financial goals when your income changes?

14 thoughts on “How to Prioritize Your Savings Accounts

  1. My favorite part of this is the fact that you have plans for a car in 2022. That seems so far away, but it’s really not. And how smart to plan ahead! I’m a big list maker, as well. I’m a big fan of carefully placed sticky notes. It’s incredibly low-tech, but there’s something about pen and paper that makes it so satisfying to put little checkmarks by items.
    Penny @ She Picks Up Pennies recently posted…Does It Really Matter Where Dave Ramsey Lives?My Profile

    • Yup. I use CapitalOne360 for my emergency fund and each of the long term savings goals have their own account over at Barclays (because… personal finance experiments, which bank is better? Although both seem to be pretty good so far.)

  2. We’ve prioritized home remodel above our retirement and education savings throughout the year, so for the last quarter we’re trying to boost our savings rate, so we can max out our accounts at the beginning of the year. It’s helpful to have a clear goal ($13K) even though we won’t achieve it in January without pulling savings from other places.

  3. Clear goals are critical. I think too many people just assume they live paycheck to paycheck and nothing will change, but with a few actionable goals they could really get somewhere!

    • Definitely worth it! Good for you! I have to say, after struggling for 4 months, it’s incredible to have a regular paycheck coming in again. Between that and a little side hustling, I’ve almost caught back up on my goals for the year and I really thought they’d be more of a struggle.

  4. I typically advise my clients to prioritize based on need and timeliness of the need. If they know that they’ll need a new or like new car sooner than later, then the car savings gets priority. If they know a home purchase is imminent, then the home gets priority. It helps to constantly examine how you are saving and acknowledge high priority areas, though, so that you can stay focused on what you want and need to accomplish.
    Shannon @ Financially Blonde recently posted…Paying for CollegeMy Profile

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