What with all the crazy change in my life, it’s got to be time to re-evaluate everything. Especially, I need to rethink my savings goals and how I’ll prioritize them. So it’s time to revisit the ol’ Savings Snowball.
For those of you not familiar with the concept, here’s the short version: much like a debt snowball, each goal has a minimum payment that gets paid every month, no matter what. Any extra money I can scrounge up goes to the goal on the top. When the goal on the top is met, everything that was getting sent to that goal “snowballs” down into the second goal, and the minimum payment for that goal continues. Therefore, the snowball gains momentum as it goes down the list.
The last time I updated my savings snowball was actually January of 2010. That snowball is so old that it’s almost irrelevant at this point, but for nostalgia’s sake, here’s what it looked like at that time:
|Name||Goal Total||Progress||Monthly Payment|
|Retirement||$10,000||$102||All that I can|
|Future Car Fund||$10,000||$188||$25|
I did manage to save enough into my retirement fund to open a Roth IRA with Vanguard, and I also later adjusted my Emergency Fund down to a more reasonable $3,000 and maxed that one out, as well. So based on my old chart, that now leaves Future Car Fund as the top dog. Or, does it?
That retirement goal was a year ago, and you know what “they” say: Another year, another Roth IRA! (Or at least, they should.) Also, since I very recently got a new job, I now have access to a 401(K) for the first time in my life. So retirement is by no means struck off the savings snowball list. But should it be top dog again?
No. Retirement savings are a long, gradual process, and now that I’ve overcome the first hurdle (opening a Roth IRA and paying the $3,000 minimum fund buy-in required by Vanguard), it’s time to focus life on the nearer goals. Retirement savings will always be on the snowball, but low on the list. Constant. Like a river.
Emergency Fund is off the list, however. Sitting pretty at a little over $3,100 right now, it’s time to let it just earn interest and be there if I need it. Someday down the line, when my expenses increase, and/or I have dependents, I’ll worry about it again.
New Fund: Travel I’ve been “allocating” money to travel for a few years now, ever since I moved down to Virginia. But I’ve never done it properly, and it’s never been a part of the snowball. But the recent news that I’ll be attending a VIP viewing of the next NASA shuttle launch brings to the forefront the fact that I really should organize myself. So, a travel fund! Because I’m young and I do that sort of thing. Note: Spending from this fund will not include travel for attending weddings. That will come from the aptly named Weddings fund.
Not-really New Fund: Occasionals It’s not in the old savings snowball, but I have been contributing to this fund monthly for quite a while now. It’s a catch-all fund for things that happen regularly, but not often. Car insurance bills, my cell phone bill (I pay my share of a family plan, but not monthly), property tax on my car, things of that nature. Altogether, the little “occasionals” add up to $110/month right now. This goes toward the bottom of the snowball, since it never needs to be the one at the top where it gets the brunt of the savings. It’s a fixed amount monthly.
Newest and Improviest Savings Snowball
|Name||Goal Total||Progress||Monthly Payment|
|Future Car Fund||$10,000||$546||$50 + All that I can|
So this is the new plan. Everything that I’ve kept on the list, I’ve also raised the monthly payment on, in light of my raise. I agonized a bit about what to put as the new top priority, of course. It could change, but the thinking for now is that my car is a 1996 Oldsmobile. It’s just not going to hang on for that much longer, no matter how well I take care of it.
The interesting thing about this is that nearly none of my savings goals have set targets anymore. Nearly all of them are things I plan to be withdrawing from on a regular basis, as things come up, so they’re “rolling” targets. For example, “Weddings” can be expected to grow fat during the winter months, and then go low at the peak of wedding season, in late spring, and cycle back around each year for quite a while.
But that’s okay! New goals will come up. Life will change. The snowball will have to change with it. But for now, as things are, this is the plan. And I’m plowing forward with it (if that’s not a mixed snow metaphor, I don’t know what is!).
Ravi Gupta says
I’ve never though of saving in the snowball fashion. Seems like a great idea and an interesting way to follow your priorities. I might have to look into planning something like this myself.
This is the first time that I have visited your site and I have found it very interesting. I’ve never actually heard of the saving snowball concept so I’ve learnt something new. I do have a budget and savings plan set up but I don’t think that I’m as diligent as I should be. Thanks for the great tips!
And I first time hear about snowball concept, it’s really interesting..
What a great concept. Will have to give it a try with the spare change I have been saving.
Yes saving in a snowball fashion can really be a great way to do it. Having a plan and following it can really make a big impact on your finances.
I was just thinking about this today, though I lump investments/savings together, and recurring expenses (including gifts, car replacement, etc) I keep in a separate area of my budget. Try to annualize(yearly total/12) each one and put that much away each month. This smooths things out quite a bit and makes it easier to make budgeting a habit.
Mine might look more like:
Risky/High yield investment
I’m glad you have the discipline to stick to it. Do you use automatic deductions so that you don’t ever “see” the money. I just find it hard to make the saving choices especially when bills are knocking at the door.
Ron Power says
Snowball savings is a simple and rewarding way to save money. I have done this in the past and it feels really good to get rid of debt.
what do you keep your savings snowball in a binder, notebook, how do you incorporate that with your monthly budget
Each savings minimum in the Snowball is written into my monthly spending plan as a planned expense, just like my bills are. My monthly spending plan itself is a simple Excel document (very simple – all the math calculations are just addition and subtraction) that I wrote myself when I was 19.