For the past year I’ve just been spending money without monitoring it… as I pleased.
While it was fun, the end result was a whole lot of money gone and very little to show for it, oops.
Thankfully I’m a quick learner (if you count a whole year as a quick) and now I’m monitoring my spending and savings.
This week I set up a separate online savings account that is not attached to any of my personal accounts and has no bank cards. This means it is very hard for me to withdraw money and I have to complete a couple of steps to make it a reality. It is much more difficult than just swiping a card.
One thing I really struggled with in the past year is setting aside money for the tax man. I wasn’t really sure how much I’d earn, or how much tax I’d have to pay without help from a free tax calc. I was quite inconsistent with putting tax money away and even when I did I’d let myself remove it from my account for big purchases such as a TV, car and whatever else I could justify as a “need” rather than a “want”.
There’s a big difference in what you have to pay in tax money if you earn $40,000 vs $105,000.
My income last year exceeded my expectations, and so with that my tax bill exceeded my expectations.
This year I’m being more cautious with my tax money and assuming my tax will be approximately 30% of my earnings.
Each week I have an automatic payment into my personal spending account of $750.00 – this is the money I use to pay for all of my life expenses, such as rent, food, power, petrol and other spending. For the past few months I’ve been helping out my family extensively so have had very little spare change from my $750. The truth is, for a single person who pays relatively cheap rent I should be able to save a few hundred a week from that and that’s my goal.
Each week I will have an automatic payment into my savings account of $500.00 – this is my pure savings amount. First I want to set aside savings to pay for my emergency fund. Once that amount is reached then I want to start saving for investments, in order to grow my own wealth.
At the end of the month I remove the balance from my account – My business account always has a minimum of $5000 – this is to ensure I have enough funds to cover my weekly automatic payments, wages for my virtual assistants, writers and other business expenses. At the end of each month I remove the excess money. I will move 30% of the total monthly income into my business account for tax purposes and if there’s any extra money remaining in this account it will be moved to my savings account – on good months that will really help me kickstart my savings goal.
I’m staying in Christchurch for another 3 months so will test this plan out for the next 12 weeks and see how I feel. I should walk away with at least $6,000 in savings which is considerably better than I’ve been doing in the past.
How do you manage your savings goals? Do you have a regular amount you contribute or is it sporadic? Let me know in the comments below.