What job do you give your savings?

Howdy, everyone. I've asked a similar question before, but hopefully with a somewhat different emphasis. I know that in YNAB we are supposed to give every dollar a job. My question is, what do you do with longer term savings.

Suppose I've allocated money for next month's expenses and the next month after that and I have an emergency fund for unexpected expenses in any given month. Now I am onto creating a cushion for 6 months or more and after that some kind of longer term savings (I should be so lucky!)

Should I match all those savings up with goals, like paying off my mortgage or buying a new car (which I don't plan to do in the near future but eventually)?  Should I create some kind of "long term savings" category and is that really a legitimate "job" for my money, since I don't have a specific plan for it? Or...?

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  • All of that. I have a Savings master category and under that I have a six month Income Replacement fund, a Vacation fund, a Gadgets fund, a Christmas fund, a Car Replacement fund, etc. Whatever your long term goals are, make a category for them. But you should have a plan for them. However, the beauty of that is that your plans can change and you can move funds from one category to another if they do.

    I don’t have plans to buy a car in the near future either but I have a Car Replacement category that I fund month after month which will allow me to pay cash for my next car when I do.

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  • But what is the plan for long-term savings?

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      • Herman
      • herman
      • 7 mths ago
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      Green Nomad You don't plan to buy a car in the near future but you do eventually = job.  Do you want to pay off your mortgage early but don't want to yet? = job.  Do you have a house, will it eventually need a roof or new hvac? = job.   Do you think some of it will be used for retirement? = job.  Long term savings can still be allocated to things you know you'll need to do in the future.  If things change, you can still roll with the punches for those long term things as well.     Don't over think it but don't just lump it into savings. IMHO.

      Like 2
  • Oh my, the problems that the YNAB method creates, what purposes can I find for this extra money.  I do like @Superbone, I have several true expense categories for things like car replacement, vacation, taxes...   I also have a general savings category to throw extra money into which I do not have a current plan for.

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      • nolesrule
      • Stealing From the Future fix is an improvement but is incomplete....
      • nolesrule
      • 7 mths ago
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      ynaber2613 

      ynaber2613 said:
      I also have a general savings category to throw extra money into which I do not have a current plan for.

       So do I. it has the boring category name of "Taxable Investing".

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      • Superbone
      • YNAB convert since 2008
      • Superbone
      • 7 mths ago
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      Mine is more exciting. Dunt da da daaaaaah! Freedom Fund! (Picture Superman looking to the skies with a waving cape in the background.)

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    • Superbone I call my group of longer term savings Freedom Accounts for freedom from stress and freedom from debt. I’m pretty sure I got the name from Mary Hunts Debt Proof Living many many years ago. 

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      • Superbone
      • YNAB convert since 2008
      • Superbone
      • 7 mths ago
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      Getting control I’ve never heard of Mary Hunt. I think I came up with it as a polite alternative to FU money.

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      • ynaber2613
      • ynaber2613
      • 7 mths ago
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      Superbone Reading a little JL Collins are we?

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      • Superbone
      • YNAB convert since 2008
      • Superbone
      • 7 mths ago
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      ynaber2613 If I had to pick ONE book on finances. That’s the one. I gave it to both of my sons.

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      • ynaber2613
      • ynaber2613
      • 7 mths ago
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      Superbone Same here along with Common Sense Investing by Bogle.  I think Collins actually has more info but the one by Bogle is from the master himself LOL.  I wish I had known this info early in my career.

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    • Superbone ynaber2613 brilliant book!

      When I start a new journal (planner, journal, diary all in one) I start with writing on the last page: “when the market crashes, for me, selling is simply not an option”, and the advice to read  JL Collins again if I’ve forgotten why 😊

      Superbone From what age could your sons read it/ would you recommend it? Don’t want to put mine off by pushing it too early.... Also, I remember my dad shaking his head about us years ago, and myself only resisting with more force 😂

      Now I’ trying to sell him on YNAB. No chance though. He’ll keep forecasting.

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    • Superbone I haven’t heard ofJL Collins. I will have to check it out. 

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      • Superbone
      • YNAB convert since 2008
      • Superbone
      • 7 mths ago
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      • Superbone
      • YNAB convert since 2008
      • Superbone
      • 7 mths ago
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      Powder Blue Pony That's a good question. Their whole lives I've preached that debt is dumb and that if they can avoid it with the exception of a mortgage, their lives will be so much easier. Just because everybody has a car loan and thinks it is normal doesn't mean that they have to. Working together with them, they both got their college degrees with a total student loan debt of $5000 between them and I refused to take on a Parent Plus loan. And that debt was all with my first son who graduated from a private university. Even then, I gave him incentive to get it down to $3000 quickly and then I'd pay the rest which happened last year.

      I think college age is about the right age to impart the book. I guess it depends on the kid and how interested they are in finances. Neither of my boys are using YNAB right now and I'm not pushing it because they're both handling their finances well and staying out of debt. My youngest just started his first real job last year and he immediately began contributing 15% to his 401k. My oldest started a Roth account a couple years ago when he got his first real job and contributes regularly to it. I couldn't be prouder of both of them.

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      • Jen L
      • Sea_Green_Network.5
      • 7 mths ago
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      Powder Blue Pony I gave one son a copy of Simple Path to Wealth as a college graduation present, and have lent my copy to my younger son, currently 19. (Reminds me: I need to get it back soon!) I've had conversations with both of them about various finance and investing topics, and have helped each to set up their Roth IRAs. Both also invest in their 401(k)s. Neither uses YNAB or any other budgeting software yet.

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    • Jen L Superbone Good to hear. 

      Mine is only 12... I thought it would be a bit early 😊. Also, as english is not his mothertongue, it will probably be too difficult now. Yes, definitely too early.

      He has his budget in YNAB, but usually forgets about it until I remind him. We do talk about finance though already. It can come up anywhere can't it? Elections here today, which made us discuss student loans. I think he was impressed by the fact I paid off the last of my student loan only last year. He's also aware we saved up to recently buy our first new to us electric car.

      Your stories inspire me.

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      • Superbone
      • YNAB convert since 2008
      • Superbone
      • 7 mths ago
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      Powder Blue Pony You are on the right path! Just being open about talking about finances is a great thing. In some families, it seems to be a taboo subject but you can’t learn and grow without open and honest communication.

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      • Bruce
      • Software Engineer
      • Bruce
      • 7 mths ago
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      Superbone Absolutely! We never really talked about money growing up.  I did have an allowance, and did open a checking (share draft account at local CU) account as a kid, but never really had any training on how to use it.  My mom always did the money, and reconciled the bank statements.  Every month when the statements came, everybody knew to leave mom alone!

      Our sons (one just turned 15, other will be 13 in May) have YNAB  budgets, and even though they only get a small allowance, they diligently budget it in various categories that they're saving up for.  We also talk about money, debt (and the importance of avoiding it) and our former money mistakes.  Also every time we get some "amazing offer" we discuss the potential gotchas and hidden costs, so they don't fall victim to scams.

      Yes, honest, open communication is so important.  And there are so many times and opportunities to talk about money.  Even just special treats, or riding the train at the zoo, can be a learning experience.  Some things just simply aren't worth spending money on (at least not ALL THE TIME), when you realize that now the money can't be spent on something else that's actually important to them.

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    • Superbone 

      I just bought it.  Thanks for the link.  

      Like 1
  • Current long-term savings goals:

    • Kiddo's college
    • Car replacement
    • Paying off Wife's Student Loans
    • Roth IRA funding
    • House Down Payment savings
    • Unexpected car repairs/tires/other major items

    Once we buy a house, the down payment savings will get traded for various maintenance items - water heater, HVAC, roof, driveway since we live up north and most driveways are paved, exterior paint if applicable, and that's what I came up with in a couple minutes.

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  • Some longer term savings categories I have (I don't label these all in my budget):

    - Car purchase (no idea when)

    - Moving cities (no idea when, but a possibility)

    - Elder care assistance for my parents

    - Retirement savings

    - Sabbatical/work travel trip (3-6 months long. Maybe just wishful thinking)

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  • Next car, future house repairs etc are all in the budget. Extra mortgage payments and investments are as well, but I “spend “ that money immediately; it then lowers the mortgage or moves to my investment account. 

    🤔 I could rename that account something with freedom.....

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  • Our long-term savings categories are currently broken into two groups, Mid-Term Goals and Retirement & Savings.

    Mid-Term Goals include:

    - Vacation 

    - Exercise stock options

    - NMI (Next Month's Income) also lives here as a holding bin

    Retirement & Savings includes:

    - Income Replacement (aka 3-month emergency fund)

    - Fund IRAs (an annual goal that we save toward monthly)

    - Taxable Investing (when this category hits a certain level, we invest it)

    When a chunk of non-salary money comes into our world, we often make a temporary category where we stash the dollars while we think of how we want to allocate them. This gives every dollar a job while preventing us from frittering away the funds on something we would later regret. 

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  • Powder Blue Pony said:
    Now I’ trying to sell him on YNAB. No chance though. He’ll keep forecasting.

     my dad, that is. My son has his own budget in my YNAB account

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  • Jen L said:
    When a chunk of non-salary money comes into our world, we often make a temporary category where we stash the dollars while we think of how we want to allocate them. This gives every dollar a job while preventing us from frittering away the funds on something we would later regret.

     Absolutely, we do the same.  I've got a few "holding categories"  One for things such as tax return/stimulus check, etc. is called "Cash Holding" where I simply hold it there until we decide what to do with it.  If it was sitting in TBB, or any other category, it wouldn't be obvious that it was "special" and could very easily get spent on frivolous things.  Not that frivolous things are bad, as long as you are intentional about being frivolous.

    So the money sits in Cash Holding until we decide what to do with it.  I also have a "Slush Fund" which is usually between $100 - $200 at the beginning of the month.  At the end of each month, for some select discretionary categories, if there's anything left, it gets siphoned into Slush Fund.  If it's more than $200, it goes somewhere else.  But it's used for WAMing when categories get overspent, and for little extras here and there that weren't really budgeted for.  

    There's also a couple others, of course Income For Next Month, holds all my paychecks until they're distributed at the end of the month/beginning of next month, and 2 different Deferred Income categories, one for my wife, and one for me.  My wife has variable pay, so when she gets a paycheck above her average, it goes into there, and is pulled from when she gets lower than average paycheck.  And since I'm paid fornightly, I get the occasional 3 paycheck month.  My Deferred Income category will be used for holding that extra check, and distributing a portion out each month to even out the hills and valleys (It hasn't been used for this yet, because I just recently made it, and my next 3 paycheck month isn't until July, but that's what it WILL BE used for)

    These all are in a "Holding Categories" group at the top of my budget.  (Oh yeah, there's also a "general reimbursable" category in there too)

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