In 2004, I read Smart Women Finish Rich by David Bach and it encouraged me to pay myself first and automate my savings and investments. I did everything that he recommended. I set up an automatic 15% into my 401k employer-sponsored plan and I opened up a Roth IRA and started putting $50 a month into it. It wasn’t until after I was married that I started automating other buckets.
Fill your Buckets
Here is a list of buckets you should consider starting after you have already automated your tax advantage accounts. These are options that are personal to everyone. I think it’s important to fill your buckets first then live off of the rest. Start teeny tiny, seriously like $10 a month! You can always increase your monthly deposit as you are able.
Extra Bucket Options
Seriously if you like to vacation PLAN for it. Every month start putting a little away so that you don’t have to stress about finances while on vacation. We started small and over time increased our vacation fund to $400 a month. For some this is a tiny vacation budget and for other’s it’s huge. This is enough for us and if we need a bigger budget it’s easier to find an extra $1,000 when we already have $4,800 saved and ready.
New Car Fund
The second you pay off your current vehicle start building a car fund. Again, if you have other debt to pay down or you want to increase your retirement savings do that AND start putting a small amount into a new car fund. If you need a car,
You should have a bare minimum of $1,000 in your emergency fund. I have a belief that $5,000 can cover most of my emergency so I use my Roth IRA as my “The World is Ending” emergency account for my extra emergency savings.
Kids’ College Fund
Honestly, our kids’ 529 has not been a priority for us. We put $50 a month into each account. Once they graduate from high school we wish them well. We thoughtfully decided to put more energy and resources into our retirement accounts instead.
It happens every year people. Do NOT put it on credit and then pay it down until March. That is crazy, if you know you will need to buy gifts start preparing for it.
- New Baby Fund – start saving before the baby is born for the expensive 1st year of having a child
- New Phone Fund – if having a new phone is important to you start saving for it now
- New House Fund – saves enough to put 20% down so you don’t have to pay extra PMI
- Home Improvement Fund – we had the grossest carpet for years because I couldn’t justify paying for such a huge expense. Saving ahead of time would have made it easier.
- Wellness Fund – This could be for new running shoes, gym equipment or massages. Buckets are not just about boring retirement goals. They can also be for
buidlinga better life now.
What other funds do you automate so you never have to go into debt?