How do I account for savings in my budget?

Question

So I'm new to budgeting, but I have been doing fairly well so far. I have been putting 10% of my paycheck into a savings account and that is reflected in my budget. My question is more accurately, "When I pull money out of savings to pay for expenses in my budget how do I show this in my budget?". I hope this makes sense.

Answer 1

Well, actually you need a seperate budget for your savings.

I like to keep things nice and neat so when I pull out of my savings I never use them for things that are in my budget. If that was the case then I should have just used my budget to pay for them and left the other money in the savings account.

You have to have savings, and you have to pay bills, but if you cannot pay your bills because you are saving then you need to rework your budget.

If the savings is being used for extra's that aren't in your budget then you need a seperate budget for your savings. In other words, you must be saving for something, like a rainy day, an operation, or a new car, a down payment on a house. In that case, you have a goal as to when you want to have a certain amount saved up for buying of that object. Then you would put in your budget to allow yourself $250-$500 of that savings to go towards extra, or for emergencies. The rest you would have as a firm savings that you didn't touch.

Budget only the 250-500 savings and leave the rest as an invisible type income that is gathering dust.

Save up the 250-500 emergency fund first and then start saving for the big item. This will ensure that you do not tap into the larger fund to get the extra's or for emergencies.

If you are trying to budget how much to save, the typical is 20-25 a week. I t really adds up quick.

Basically what i have been trying to say is that you never pull from savings to pay things in your budget. That defeats the purpose of saving. If you use your budget and pay regualaryy all of your bills, then need to pull from your budget for emergency items then you budget it onto your savings budget, and don't pull from your budget to pay the extras. Always keep it seperate so that you can have a clear view years from now as to why you are growing or declining in your savings. Trust me on this one. I have learned the hard way that this is the only way it works.

If you just have to do it the other way and show the savings on your budget, then show it as income/extra. This way you know it is not a constant and do not plan on it. Otherwise it will drain your savings.