Saving for the sake of it
Hey fellow ynabers,
I've been a long-time user but it's my first time posting.
During 2016 I managed to accumulate a bit of money. I put those into two categories: Emergency fund and Life Savings. I was all happy to have some money aside and in 2017 I used YNAB rigorously and daily.
Come the new year, I decide to use the reporting features to see how I did in 2017. I was shocked. I managed to save only 2k off my yearly salary (please note: I live in a country where the retirement is state-provided so it does not include retirement funding).
The reason why I saved so little, is because of how I've been using YNAB:
I felt good about having some money saved in my two categories, so I then felt compelled to assign the rest to other categories (a new phone, dining out more, ...) and so I did not grow my savings.
Here is the question: How do I fix this behavior?
I've read all the tutorials and watched all the videos on savings, but they mostly say "Assign money to a specific category, like a new bike" but that's how I found myself only adding 2k to my savings during a year!
I don't know yet what the money I want to save will be used in the future. Maybe to buy furniture for an apartment, maybe to buy a house.
Should I just set a goal to grow the "Life Savings" or "Emergency fund" category by x amount? But that doesn't feel very ynab...
This is something I've thought about also. Don't now if it will help but this is what I came up with for myself.
I looked at where my money was going and set my budget up in a way that gave me some clarity on this. What is going to just discretionary living expenses, food, gas, clothing, that sort of thing? What is going to necessary monthly expenses, rent/mortgage, utilities, insurance payments? What is going to annual expenses? What is going to savings? What was going to fun money?
After some searching both on the internet and of my priorities. I came up with a percentage I wanted to spend in each grouping, or as I set my budget up, category groups. Some were set, monthly and annual expenses. Some were optional, savings goals, Some were discretionary, I had to spend something but I could easily adjust these.
Then set up my goals in the category group name and my goal is to fill them all up. I now have a budget template which I use every month. Sometimes I don't fill it, sometimes I have a little extra. This way I don't feel like I spent too much on fun, because I know I put two times as much away for savings. I know my monthly expenses are taken care of. Things like that.
It is also important to have goals, like a new computer, special clothing, vacation, something really, really big, a home. Then come up with a plan and fund these things, Make them something more important than that "new shiny thing" calling your name at the store.
Saving is just delayed spending. Were you always going to buy a new phone? If so, then the fact that you created a category for it to make sure that you could afford it before you bought it is not a bad thing.
Maybe you need more granular categories than "life savings". What does that even mean? Savings for what? What is the emergency fund supposed to do? If you don't know, you won't know when it has "enough". I don't have an emergency fund per se. I have a loss of income fund and that is to cover mortgage/utilities/food/health/car insurance/etc for 6-9 months if I do not have a job. I have a separate category for Medical Emergencies, and one for home repairs, and one for car repairs. Plus I have a special categories for the major HVAC replacement I'm doing in a few months, a new car in 10+ years, a kitchen remodel etc. I also have a category where I allocate funds for my monthly taxable investing.
I agree jenmas in that maybe you need to be more granular with your "life savings".
We have an emergency fund which is to cover unexpected job loss or a serious illness for 6+ months. It's not a "catch all" for everything. We do not touch this.
In addition to the emergency fund, we have rainy day funds for things we know we are going to have to spend money on, we just don't know when. Things like car repairs, vet expenses for our two dogs, new contacts and glasses for myself, even just basic clothing replacement.
Outside of rainy day funds, we also have a few other savings goals we're actively working toward. Car replacement funds, a vacation, and a home down payment.
All in all, I'd say we actively save about 30-40% of our take-home income (not including pre-tax retirement savings and the rainy day funds).
I think having a purpose behind the savings will drive results.
Agree with jenmas and Heather .
And if you get to the point where you've figured out all those categories and they are as full as they need to be from monthly inflows and you still find yourself with leftover money once everything is budgeted for, at that point you are ready to figure out a long-term strategy for what is truly extra money.
But you have to get there first.
Have you thought about savings in terms of FU money? It's a powerful motivator. Google may help you get a better definition, but basically it means having money in the bank to say F* you to whatever life throws at you. You might have retirement covered (yay!) but presumably, that is only after a certain age. What about before then? What if you want to escape a shitty boss, take a career shift, start a business, retire early, or need a break to deal with illness (your own or family)? Or just say screw it and travel the world for a year? And the best part is there's always another milestone to reach for because the more you have there, the more choices you have.
It doesn't happen overnight, but the more you build, the more options you have. We've been working toward this for years now. We went from a 3 month e-fund, to a 12 month, now we could go 4 years without income. Final goal: The option for early retirement! As a single income family with 2 kids, each step has given us more confidence and options we could not have taken otherwise.
Thank you all for the replies. Ultimately I think a mix of what jenmas and Heather said.
My current "Emergency fund" covers my immediate obligations and true expenses categories for 6 months.
The life saving I was seeing as a cache of money to never touch the emergency fund when the unexpected happens (like an unexpected change of apartment, like it just happened). Maybe dividing it up into more granular and meaningful categories will help me save more money during the next year, so I'll try that.
Once I can't figure out more specific savings goals (after all, the unexpected is by definition unexpected), I'll go with the FU money as described by Orchid Mantis as it sounds more appealing than "Life savings" and it kind of puts more meaning to it.