16. You can just... open a savings account
Problem: I didn’t have a good way to save for specific large purchases.
My personal finance situation looks something like this: each month, I get two direct deposits from my employer. One on the 15th, one on the last day of the month. Also each month, I can see the amount of money I’m sending to my 401k and the total balance I’ve accrued on my credit card (which I pay off each month).
I have a monthly savings goal in my head — the amount left over when I remove the 401k and credit card balance from the sum of the deposits. A significant part of my compensation is an annual bonus, and I save most of that each year. I also track the balances of each of my accounts each month in a spreadsheet, so I know my assets, liabilities and net worth (probably with too much precision).
But my actual monthly budgeting is pretty limited. Occasionally (every 6-12 months) I’ll download a month’s worth of transaction data and categorize it by hand to see where I’m spending. Usually the categories that surprise me are ride sharing and food delivery. I also have a few “money intuitions” that guide my spending. For example, one large expense per month (like when I paid to have my wisdom teeth removed) is alright but multiple large expenses means I’m probably not saving enough.
Not having detailed tracking hasn’t been a problem to my net worth, but it feels spontaneous and out of control. These are not words I want to use to describe your finances. What I really wanted was a way to say: “Okay, I got fitted for an expensive, custom-made blazer. I could buy it now and try to remember to spend less the next couple of months. Or, I could put a bit of money away the next few months and buy it when I have that money earmarked for this purpose.” So I went searching for goal-based savings apps.
A bunch of startups built products to solve various savings needs. Acorns automatically rounds up when you buy something and saves the difference for you. Others like YNAB are known for their budgeting tools but also have savings tools built in — that might have worked, I didn’t want all of the other stuff that came with it.
Solution: But I’ve learned the easier way is to simply open a savings account with my bank, and automatically transfer money into it. I did this last weekend online at US Bank and now I have a savings account strictly dedicated to a savings goal.
I guess I didn’t realize you could do this? I underestimated the features a monolithic bank like US Bank would have. It took just a few clicks to set a goal, name it, transfer an initial funding amount and set up a recurring funding amount. Most of them are cheap or free (mine is $4/month), depending on what kinds of returns you want and the minimum amount of money you put into it.
Now my savings goal is automated, and I feel more in control of how I’m spending that extra cash.