The Bucket Savings/Budgeting Plan
A month ago, my air conditioner for my house broke. What a pain, and when I got the repair bill, what an expense. The worst part was that I was not really prepared for this expense at all. It was a scenario that I wanted to avoid in the future. My plan was to implement the “bucket” savings and/or budgeting method.
How It Works
This strategy involves having multiple “buckets” where you automatically transfer money from your main checking account into these buckets each month. These buckets are pre-identified to pay for some purchase or expense.
For example, I have the following buckets setup:
- House Maintenance (auto-transfer $25 into this bucket each month)
- Car Maintenance (auto-transfer $25 into this bucket each month)
- Savings for Big Purchase – i.e. television, new furniture, etc. (auto-transfer $25 into this bucket each month)
- General Savings (auto-transfer $250 into this bucket each month)
With this setup, hopefully the next time something breaks on my car or home, I will have the money saved in the corresponding bucket to pay for it. Since I have my bank account set for auto-draft into these buckets, they will automatically replenish the funds.
The great thing is that you can customize this plan to suit your needs perfectly. Maybe you want a bucket for saving for a down payment.
What Are These Buckets Actually?
If you use ING Direct, you can create as many savings accounts as you want. I create a savings account for each of the above “buckets”. You can even give them a descriptive name so you know what the bucket is for.
I recommend signing up for ING Direct and getting started on this method of saving and budgeting right away. I don’t know a better method for being prepared for big, unexpected expenses. It is getting hit by and be unprepared these large expenses that can really shatter a monthly budget.