Savings account, 401k, CD…. the options can make your head spin. We’re setting up money saving principles AND talking about easy ways to stash some cash.
Today we are talking about SAVING. Whether you’re saving up for retirement, a new home, or a new pair of shoes the principles remain the same. Listen, I’m not going to pretend I’m the queen of saving. I’ve had my weak moments. You’re talking to a girl who once bought a $1,200 Chanel on a $40,000 salary (my justification? I was investing in myself – leveraging future earnings. Not wise). But that same girl now has 2 checking accounts, 2 savings accounts, and a thriving 401k game.
I’m going to give you some personal, girl boss to girl boss advice on how I think about saving. But before you get started on your own savings journey, you should take this information and consult your family accountant or start a relationship with a client associate at your local bank to come up with the best customized plan for you.
A Shoe Addict’s Savings Principles
1 – Have several tiers of savings… and several accounts.
I have the following tiered system of accounts, and only one (the primary checking) is tied to a debit card. Minimizing risk 🙂
- Primary Checking (This one is tied to my direct deposit & my credit cards. Where all of my cash flows in and out of.)
- Slush Fund (extra money in a secondary checking account for fun purchases a la shoes)
- Emergency Fund (a savings account with (ideally) three months’ income in case something happens)
- Don’t Touch Fund (this one I have jointly with my fiancé – it’s a high yield savings account for big joint purchases like a home or to add to our retirement, and a company-sponsored
- Retirement Fund (also known as a 401k)
2 – Balance yield & flexibility.
Because we are in a low interest environment, regular checking and savings accounts aren’t working particularly hard for us (you’re looking at 0.06% annually if you’re lucky), so you may be inclined to turn to less flexible vehicles (for example, a CD – definition below) for better yield. Before taking that step, understanding your flexibility tolerance. Will you need that money over the next 24 months? Don’t lock it up – or you could incur FEES.
3 – When saving, seek wealth maintenance not wealth creation.
You’re not going to get rich off of your money market account, let’s be real. Savings are for stashing and maintaining money you’ve already earned. Looking to create more wealth? Let’s talk about a side hustle for that.
4 – Do your own analysis.
Seems counterintuitive to this article giving you advice on your finances, but don’t blindly put all of your money somewhere because that’s what your best friend did or your dad did when he first started out 30 years ago. Take information from as many credible, reliable sources as you can and then synthesize it for yourself and your circumstances.
5 – Save as much as you can and allow for small splurges (instead of the other way around).
This one I learned the hard way (see Chanel example from paragraph one). Devise a plan to save as much as you can after fixed living expenses, but don’t beat yourself up over the occasional splurge. It’s much better than the other way around (splurging left & right, and occasionally stuffing $20 under your bed in a “savings box”). Hard to motivate yourself to save? Set milestones for yourself – when you save $1000, you can splurge on the new GlamGlow Glitter Mask.
Looking for a glossary? Check out my Personal Finances Dictionary for an easy to understand breakdown.
Happy saving, my friends.
Quick disclaimer. I am not a financial expert or banking professional. This is an opinion piece for entertainment/informational purposes only. If you choose to rely on this information in any way, you do so at your own risk.