I found this super old post (2009, aww!) the other day, talking about savings goals — and I was struck by how much my approach has changed. So let’s discuss: have your savings goals changed over time (in more ways than amount)? If you could travel back in time, what would you tell your younger self to change about their savings goals?
{related: not sure what to do first/next in your personal finance journey? here’s our money roadmap}
What My Savings Goals Used to Be
Back in the day, I noted that my father had advised me to always set a savings goal — it started at $100 monthly in my lean days as an editorial assistant, and became a lot higher when I started my lawyer life at my Big Law firm.
{related: financial tips for new lawyers (or other women in their first high-paying jobs!)}
Back then, I noted that I preferred to manually move my savings from one account to another — at the time, there were some crazy interest rates available in money market funds (I remember 7%!), so I would transfer the money from Chase to Schwab.
I saw some big benefits, back then, to doing it manually:
First, how much I save is very present in my mind — my savings target has sort of morphed into a checking account target; I don’t like to keep more than so much money in my checking account and I move everything above and beyond that into my Schwab account (my savings target is more like a minimum, in my mind).
Second, I am very aware if I’m dipping into my savings. If I can’t meet the minimum savings, I reexamine my month — what was I doing that cost so much money? If I actually have to move money over from my savings account back into my checking account, I buckle down even more.
It’s interesting to read, because the methods and theories behind my savings goals have changed quite a bit.
How My Savings Goals Have Changed Over Time
The few big things I’m doing differently these days is a) saving almost everything automatically, b) choosing when to invest instead of save, and c) saving for multiple financial goals in different accounts.
(I also use Ally instead of Schwab for my savings because they have high interest rates and Schwab money market funds have been lousy for at least a decade. Note that a lot of readers prefer other banks over Ally, though!)
I Love My Automatic Savings
As I’ve noted before, I love to automate my savings, primarily to amortize big bills I know are coming (e.g., I have one account for all of our insurance bills over the year, another for estimated tax payments), but also to encourage me to spend.
I adjust the numbers for the different savings accounts manually (and fairly often, maybe twice a year) — but the money is out of sight, out of mind.
I also move money over from the various savings accounts pretty regularly without feeling bad — it’s kind of a relief if we get some large bill for something (e.g., ear tube surgery!) because it’s kind of like found money that is magically there to pay our bills.
Choosing Investing Over Savings
It took me a while to figure this out, but I’ve also been doing automatic investing for a long time, setting up $100 a month or more to purchase a general index fund.
I do adjust that number fairly regularly, also — it can be upwards because all of our savings accounts are “full enough,” or I’ll adjust it downwards if I think we have some big purchase coming up that we’d prefer to have more money readily accessible.
I invest manually at other points through the year, but I’m a fan of the automatic investment.
(Plus, once you set it up it’s easier to change the number than to figure out how to do it again. But here are instructions on how to set automatic investing up for Schwab and Vanguard that have been pretty recently updated.)
Saving for Multiple Financial Goals in Separate Accounts
This is a big change that I think I’ve only started doing recently — of my multiple financial savings goals I now have a set amount that I move into a vacation fund.
I really really wish I had done this when I was younger — back then I just had one big bucket in my money market fund, and it felt like a loss every time I had to go into my savings to cover some expense. As a result, I didn’t travel a lot unless I needed to for weddings or whatnot, and I really, really regret that.
At the time it felt like I didn’t know what I was saving for — buying an apartment? getting married? going back to school — so I wanted to save as much as possible… but I still think there would have been room in the budget for vacations.
Readers, how about you — how have your savings goals changed over time, either in method or theory? If you could travel back in time, what would you tell yourself?
Stock photo via Stencil.
