The Money Mustache Community

Learning, Sharing, and Teaching => Ask a Mustachian => Topic started by: carloco on April 02, 2014, 06:41:51 AM

Title: Help with Savings Snowball
Post by: carloco on April 02, 2014, 06:41:51 AM
As I strive to become more a more mustachian every day, I need a little assistance with savings in general.  Yesterday, I thought about doing a Savings snowball to finance several projects instead of saving a little bit at a time for several things.   
It seems that our family spending without mortgage and school is about 2K a month, if I that leaves about 700 extra to save for everything from vacations, retirement, rainy day, and kitchen remodel. 
I was wondering if it be wise to pump all the cash to and save for one category at at time.  In that way we can finally remodel the kitchen and actually enjoy it before we are ready to downsize.
By the way, when mustachians in general talk about the amount of money they live on do they include savings for future expenses?
Title: Re: Help with Savings Snowball
Post by: Thegoblinchief on April 02, 2014, 07:49:20 AM
A full expense breakdown, even estimates, is helpful.

The way my DW and I do it is that we have various savings "buckets". My income is commission and highly variable, so I use percentages of net cash flow per month.

Currently it is 50 percent to debt, 10 to travel, 10 to homeschooling expenses, 10 to vehicle replacement, 10 to house improvement, and 5 to each of our personal spending accounts.

We've just started this, so the percentages will probably change, but hope that helps.
Title: Re: Help with Savings Snowball
Post by: carloco on April 02, 2014, 08:06:47 AM
That's similar to what i've doing.  For example, to save for a kitchen remo, at 110 bucks a month it may take 5 years to reach that goal.  Instead, If we were to allocate the whole amount every month in a few months we would be there. 
Title: Re: Help with Savings Snowball
Post by: swick on April 02, 2014, 08:20:21 AM
This is something that is highly personal and doesn't really have a "one size fits all" solution. It really depends on your goals and priorities. From what I gather, most people on the boards have savings buckets and have decided what they want to do, how much they will need and put aside money each month accordingly.

For us, some saving goals we treat as bills (RRSP savings, savings for a used car replacement 10 years out, replacement costs for all major appliances and home maintenance) which is part of our monthly budget.

For the softer goals like travel, optional home improvements and that sort of thing, we have buckets for those too, but realize that our goals and circumstances might change (this is becoming more and more apparent lately) and budgets are flexible. You just have to view everything as a trade off, and consider what brings you the most joy and makes the most financial sense.
Title: Re: Help with Savings Snowball
Post by: electriceagle on April 03, 2014, 07:31:47 AM
I learned all about snowballs from Kevin Smith. Not much savings there though.

I would suggest that you cover the rainy day / emergency fund first. Once you have that in hand, start saving for vacation, kitchen remodel and retirement by putting money in bonds or index funds. When the time comes to spend, take the money from the emergency fund and replace it with money from the bonds/index funds.

36. No, wait, 37.
Title: Re: Help with Savings Snowball
Post by: lackofstache on April 03, 2014, 08:20:45 AM
I save for things in an order of preference, and I generally only do one at a time.

In your case, you have two different kind of savings. One is actual long-term saving, another is somewhat deferred spending (the kitchen remodel, etc.) I would prioritize the actual long-term savings, personally.

This is the same way we try to work it, though we've still got a bit of debt to kill. We focus on one major thing, i.e. debt right now. I'd second focusing on long-term savings rather than deferred spending. If you can focus on the saving aspect overall, meaning putting as much away as possible, when the time comes to remodel your kitchen, the money will be there.
Title: Re: Help with Savings Snowball
Post by: carloco on April 03, 2014, 09:27:03 AM
Thanks for the suggestions, I need to add that my rainy day fund is funded.  I may have included deferred spending in that category.  For the next few days, I think I should concentrate in deciding what is considered delayed spending and what is actual savings; Then, I'll prioritize them. Maybe using the approach that Serpenstooth  suggested of cascading.