We’re quickly coming upon one of the busiest spending times of the year, the Christmas season. For too many years I would come up to Christmas and suddenly realize that I had woefully under-prepared for the coming holiday. I never saved up enough money to pay for gifts for my immediate family, friends and relatives. This is a snafu that I easily could have avoided by setting up a specific savings goal for Christmas spending, and then saving for the expense throughout the year.
Automating Savings Goals Means Never Coming Up Short
One thing I’ve learned in the past couple of years since becoming more aware of my finances was that you need to plan for expenses throughout the year, and save for them all year long. That way you won’t find yourself in a hole when the expense comes due. You’ll already have the money saved up in cash.
The prudent understand where they are going, but fools deceive themselves. Proverbs 14:8
What are some irregular expenses that come up every year, but you don’t pay every month?
- Christmas gifts
- Birthday gifts
- Property taxes
- Automobile registration
- Automobile insurance
- Homeowner’s insurance
- Planned for auto maintenance
- Household item replacement
These are just a few of the expenses that occur infrequently (once, twice or four times/year) that can create problems for families, especially if they forget to plan ahead for them. What are yours?
Setting Up A Christmas Budget
Earlier in the year my wife and I sit down and decide on a family budget for the year that includes all of our regular, and infrequent expenses, how much we want to spend, and how much we need to budget for those categories each month. Since we both have pretty large families we usually have a Christmas budget that is $300-400 (at least).
Once we decide on a budget for the year, we determine how much we should save towards that goal for the year. In this case, we’re planning on spending $400 – which means we’ll need to save somewhere in the neighborhood of about $33 bucks a month. We set up the goal, and then start saving towards it.
Making Your Savings Goal Even More Automatic With Smarty Pig
My wife and I haven’t had much problem in determining a Christmas budget, or with setting up regular savings goals to make sure we have enough money at Christmas, but I’ve found there is an easier way, a way to make it automatic.
Earlier this year I was introduced by some other bloggers to a bank that makes setting up savings goals a whole lot easier. That bank is Smarty Pig, a part of West Bank, a FDIC insured bank (so your money is safe!). Smarty Pig allows you to set up time specific savings goals within your account, and then will automatically withdraw the amount needed to reach the goal each month . So for example let’s say you set up a savings goal to save $400 for Christmas gifts by 12/15/2010. You would then be able to have you money automatically withdrawn each month from your linked account so that when next Christmas rolls around, your $400 in Christmas cash is ready to spend!
Increase Your Savings By Up To 12% Using Cash Boost
Smarty Pig also has something they like to call “cash boost” where if you reach your savings goal you can then receive a cash incentive to use your money towards a certain company’s gift card. Here’s how they explain it:
Once you’ve reached a savings goal using SmartyPig, you can receive up to a 12% cash boost on your savings by placing it on a retail card like Home Depot, Travelocity or Macy’s. You can even parse out your savings among retail cards, or put only a portion of your saving on a card or cards.
How does our retail card program work? Great question. Let’s say you’ve saved $2,000 and want to put those savings onto a Macy’s gift card for some new furniture. When you select this option, SmartyPig will pay you a cash boost of 12% for an additional $240. That’s the SmartyPig difference!
I’m sure the companies just chalk it up to an advertising expense, but if you’re saving up for a particular purchase, and you can buy it at one of the participating retailers, why not do it this way?
For example my family buys a lot of books for Christmas, and one of the participating retailers is Barnes & Noble. For us it makes complete sense to save up for that Christmas savings goal, and then put at least a portion of the completed goal into an Barnes & Noble gift card because we can get a cash boost of 5%. Another part of it we may put onto a Macy’s gift card and get another 12% boost since we get a lot of gifts there for my wife’s family. If we still have money left over we can do a no fee funds transfer back to our linked account. Easy peasy.
Setting up savings goals for your infrequent yet regular expenses is a great idea. It means that you won’t be surprised when a big bill lands in your lap. You’ll have the money ready and available to pay.
Bank accounts like the ones at ING Direct and Smarty Pig allow you to do just that by allowing you to set up savings goals, and by automating the savings process – forcing you to save for those irregular bills. With Smarty Pig you can even get your family and friends to contribute to your savings goals through their new social features. ( Just beware of the fees associated with doing that when you pay via credit or debit card.)
I would highly recommend setting up a budget, and making sure to save each and every month for infrequent expenses like Christmas spending.
What do you think of setting up for specific savings goals for infrequent expenses? Have you done this at your household? Or do you find yourself surprised when some of these bills arrive? Do you use a linked and automated savings account like the one from Smarty Pig to help you save throughout the year?
Want to start goal based saving today? Give Smarty Pig a try. <–affiliate link
I use the ING sub-account feature…and I LOVE IT! The Wife and I have sub-accounts for car expenses, vacations, Christmas shopping. I do the math myself and subdivide.
I never used smartypig, if I remember correctly when they first came out, didn’t they have a penalty for early withdrawal if you didn’t meet your date specified goal? And their rate wasn’t much better than ING (although that looks like it has changed).
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Peter Anderson says
I believe when smarty pig first came out they were plagued with complaints because of all the fees they charged. i think they have scaled most of those fees back.
I don’t think they charge for editing a savings goal at this time, and it is free to do an ACH funds transfer to a linked account. Their terms and conditions found here.
Their rate is a bit higher than most high yield savings accounts right now.
This has been a great concept for relieving financial stress at Christmas time or really anytime when a lump sum payment becomes due.
I basically just use my savings account to hold all of the funds and use an excel spreadsheet to earmark the dollars in the savings account. It may seem a little difficult for others, but it works for us.
I use ING Direct online account. It is simple to set up and the money comes out automatically same day each month. The “cash boost” thing is interesting. I’ll check in on that.
I usually just try to knock out some Christmas shopping throughout the year. It takes a little planning and forethought, but as the holiday approaches, the peace of mind knowing that a percentage of your holiday shopping is already done and paid for is priceless.
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