When I first started full-time employment, I didn’t really have a clue what was going in and out of my bank account. I was living in a shared house – with everything being split 4 ways on top of my new management wage, my outgoings weren’t massive. So I just spent without ever needing to check my bank account.
Then I discovered a saving account that gave you some money if you put £250 a month for a year without making any withdrawals. So I did that and realised how good it feels to save money.
I then found the first reason that having a rainy day fund is useful:
If the money is in your current account, you’re more likely to spend it.
So put it in a savings account and keep your hands off. As soon as I put money into my savings, I don’t see it as my money anymore and there has to be a good reason that I’ve thought through thoroughly (can you say that 10 times?) before I make that withdrawal.
I continued to save to the point I had enough money to afford a holiday to Disneyworld Florida plus spending money. Okay, that might not be the best thing to spend your savings on – but the point is savings quickly add up so you can afford things that you can pay off straight away, rather than make deposits and small payments here and there. That feels good.
This savings account has kind of become my holiday fund account now. Since I’ve been to Florida, I’ve used the money I’ve saved in this account for going to Cyprus, Zante, Australia and booking my holiday for this year in Crete. Plus spending money!
A few years ago, I opened a second savings account. This was for my blog income. I didn’t really know what I wanted to use it for and the first year I made money blogging, I didn’t want to spend it until I knew the amount of tax I would be paying. So I transferred all my blog earnings into that account and treated it like someone else’s money.
This account has kind of become a bit of a rainy day fund for me, or for buying things I wouldn’t usually buy. I’ve paid off my credit card a couple of times with it from when I’ve put things like car insurance, MOT (that cost me a FORTUNE), new Macbook book when mine went kaput. I also used that money to buy furniture when we moved into the house. It was nice to have some money already set aside for things like this.
This summer I opened a 3rd account. Yes. A third. This one is to the future. Since moving out of my flat where I lived alone and in with my boyfriend, I’ve had a bit more cash due to not paying everything on my own. As I did manage before, I didn’t want to start spending whatever I wanted without thinking about it. So I decided to open an ISA savings account. I put money into this every month to be used for when we get a bigger house. Whether that’s towards a deposit or work done on the house, I’m unsure yet.
So currently I put £200 into my savings account I use for holidays a month (regardless of if I have a holiday planned or not). £200 into the account for a new house and any money I make through blogging gets transferred into that account straight away.
My next mission is a car fund. I got trapped in the cycle a few years ago of getting brand new cars on finance every two years. This meant I was never truly owning a car. So after the 3rd time, I went to pick my brand new car up, I felt underwhelmed and decided it would be the last time. After the end of my 2 years, I got a loan with my bank and paid the car off. I still have a bit left to pay on it, but when I’ve paid up I’m going to be using that money to save up for my next car. I plan to have this one a few years yet as it’s only 4 years old.
It actually feels quite good to be so in control of my finances and knowing that if something happened, I wouldn’t have to rely on my credit card or any quick paying online loan companies. These are always an option if you are super stuck, but it’s always better to have a backup fund to save you paying interest!
How do you organise your finances?