Savings vs Budgeting

Jami74

2019 has been my transitional year. Every time I've had a yearly expense (Christmas, car tax, insurance, etc) I've paid for it as usual in a lump sum and started putting away a monthly amount to cover it the next year.

It means my monthly 'outgoings' seem to have increased quite significantly as I'm now covering all the big yearly spends on a monthly basis, but this is better representative of my monthly monetary needs, which I had always estimated to be much lower. From now on there shouldn't be 'tight months' because something big is due.

I've been thinking all year that it is money that I have saved, but I suppose really it's a monthly payment plan, Pay Now, Buy Later.

So my question is:
Do you think of the money put away every month for expected future expenditures as savings or simply monthly budgeting?

Sea_Shell

Personally, I wouldn't think of the money as savings, as it's all allocated and accounted for.

Savings are what you put aside over and above your spending needs.

enthusiasticsaver

I would think of it as budgeting and we do the same. Not only for annual expenses though but replacement items etc. We do not have anything in savings which is not allocated towards something. We do not save just for the sake of saving.

Hence we have a full emergency fund which we rarely touch and don't add to any more.

We have a car and ebike fund for maintenance, insurance, replacement and we have a house fund for general household expenses, home repairs and improvements and furniture/electrical appliance upkeep and replacement and insurances, boiler services etc etc.

We also have a holiday fund for annual holidays, long haul holidays, weekends away and a gifts fund for birthdays, Christmas, cash gifts to our kids/grandchildren and charitable donations.

So four savings envelopes spread out across one current account (high interest paying) and two internet savers. Of course if needed we can transfer between the accounts if one envelope is tight and another is full.

Our long term retirement funds superfluous to our pensions are invested and in one long term savings pot.

Whichever way you think of it the way you are budgeting means a more even spread of expenses over the year and you always have money waiting to pay whatever bills are due. Makes sense and more people should do it.

Notepad_Phil

For me:

I put monthly contributions away for everything that I'm likely to ever need to pay for. e.g. I know I've just bought a new car, but I'll need another in 6 years time so I'll put away money each month so that in 6 years time I'll have enough money. I also know that in an average year I'll need to buy x, y and z so I'll put a monthly sum away for that too. Etc, etc.

I also have an emergency fund of 6 months net income - this has come in handy e.g. when things have broke before they should have done, and especially when life hasn't happened the way I planned it e.g redundancy. I'm retired now so redundancy is not likely to be on the horizon, but I still have my emergency fund just in case.

Savings is then anything left over from my monthly budget contributions and which I'm not willing to invest for at least 10 years.