There has been a lot of discussion around savings tactics lately so I thought I'd share mine as someone with a fluctuating income. Since I don't have a steady check to count, I handle savings differently and it's the best method I've used so far.
I have a few income streams (fairly small but slightly more than I need) and they all fluctuate each month.
I started with $x in my savings account (let's say $1000 for easy math) and view that as my minimum. If I get down to just that amount, I consider myself completely broke.
I choose to use $500 increments so, if I get to the end of the month and have $600 left in my checking account, I move $500 of it to savings and leave the $100 in checking as some buffer. In this scenario, I now have $1500 in savings and this becomes my new minimum amount.
On months when my income is lower, that bit of extra buffer in checking gets me by and the savings account stays the same. Months when I make good money, the savings account grows. If I fall short of my $500 increment ($490, even), the amount stays in checking and I reassess at the end of next month.
If $500 is too much for you, drop it down to something that works -- $20 if you need to, it doesn't matter.
There are four reasons this works well for me.
- It makes a game out of my personal finances rather than being a purely stressful topic
- Each time I move another $500 into that account, it feels good. Something something reward system.
- By being strict and not considering those savings as being my money, it's stopped me spending when I otherwise would have
- If I'm nearing the end of the month and checking isn't far above $500, I'm more inclined to be very frugal in an attempt to stay above that amount. Falling short by a few dollars and just barely missing out on saving more money doesn't feel good so it's a good deterrent.
See, if I have $1000 just sitting in my checking, I find it very easy to spend $20 on coffee and some food. On the other hand, if I have $48 in my checking account, spending $20 of that feels stressful and like a clearly poor decision.
February 05, 2021 at 04:45AM
