You are saving money and that is good. That is the right thing to do. Yay you and your savings! Except, it isn’t enough.
That is the bad news. But the good news is, if you are already saving, the next (and most important step) isn’t a hard one.
The Fun Part
The critical step that you are forgetting/ignoring/avoiding is one simple question, “What are you saving for?”
Just like the dollars in your budget, every dollar in your savings needs a job.
Are you saving for an emergency? A vacation? A new laptop? Whatever it is, it needs to be thought through and clearly identified. You might be thinking, “What’s the big deal? YNAB, you’re taking this ‘Give Every Dollar A Job’ thing too far?”
When your savings is aimless, it’s ability to grow is largely hampered. It’s just too easy to raid the savings. Because you aren’t moving further away from “Epic Anniversary Trip” or “New Laptop”, you are just using some money from a big pile of extra money.
Why The Details Matter
For most of us—without a specific job—the temptation is just too great. And one of the following scenarios plays out:
Transfer To Oblivion
You have money in a savings account, but the dollars aren’t really earmarked for anything specific, so when you overspend, it’s easy to just transfer money from your savings and call it good. Or you overspend, pretty intentionally, because you know you have money in savings to cover it. Lots of relatively meaningless transferring back and forth and back and forth. This is an awesome way to stay very, very stagnant.
Spending Black Hole
Aware that you have a big pile of money sitting around, you just spend it. You don’t go through your typical prioritizing exercises, you might even do something kind of spontaneous or reckless because your money doesn’t seem finite, it seems like a big pile of extra just hanging out with nothing to do.
Separate Accounts Aren’t Protection
But not you, you don’t want to fritter away your savings, so you are going to put it in a separate account. Maybe if you don’t see it everyday you won’t spend it. Except? Putting your money in a separate “savings” account doesn’t protect your money. What protects your money is saying, “This money is for our Epic Anniversary Trip!” The account is irrelevant, the job is the protection.
Become A Saver And A Decision Maker
Keep saving—it is a powerful habit. But also become a decision maker. Decide what exactly you are saving for. Making that decision creates some anticipation and purpose that helps protect your money from, well, you.
The specificity of the decision will give you strength. Those dollars will have meaning and value attached to them that provides purpose and clarity.
So what can you do if you suffer from aimless saving? Simple—give every dollar a job. Think through what you are saving for, what you want that money to do, and give those dollars important jobs! Every single one of them. Then commit to your priorities and watch your money grow!