The practicalities of building up money pots in the early days

ChasingtheWelshdream

I have a separate Debt Free Wannabe thread going about building up an emergency fund, but I think this question is best suited here. Please feel free to move if that is not the case.

I have created money pots in my banking app for every conceivable area from our SOA and allocated an appropriate amount to each for the first time this month. It sounds silly but I'm actually rather proud of getting to this point.

Where I am struggling, is how to administer the pots while the funds are building up in the early days, when the pots don't yet have enough to cover the bills as they come in.

The SOA calculates annual expenses divided into 12, so how does is work in real-terms throughout the year? For instance, there is £120 in our car maintenance fund. I will need new tyres and a service very soon, which will cost more than we have managed to save by that time.

Our birthday/present fund is calculated on a set amount per person/event and over 12 months will be sufficient. But it will not yet have enough to cover the next 3 birthdays in quick succession.

So as hopeful budgeting newbie, how do others manage these?

We will have enough to cover the above scenarios from our 'general pot', but do we rob Peter to pay Paul in the meantime? 

tacpot12

Good question! I use savings pots for all my expenses that are intermitent or occur less often than montly. I can't remember what I did when I was starting out, but there are really only three options: 

• pay from your current account
• pay from a savings pot where you do have the money
• brorrow (via a loan or credit card)

Borrowing when you have money in your current account or a savings pot doesn't make sense, especially in a Debt Free Wannbe context. So even now, if one pot is short, I will take the money from a savings pot where I have money, and replace it at a later date. I track my pots on a spreadsheet, so I record an 'IOU' on the spreadsheet in the pot that owes other pots money. 

The number of times I have to do this is very low (perhaps just a couple of times a year) as my pots have been running for a long time (7 years?) 

Jami74

ChasingtheWelshdream said:

We will have enough to cover the above scenarios from our 'general pot', but do we rob Peter to pay Paul in the meantime? 

Yes, pretty much. When I very first started, I started pots one at a time because I literally did not have enough money to continue paying stuff that needed paying and put in a pot for next year. The first car insurance was paid for half from the pot and half from elsewhere, but having that half a pot took enough pressure off that I could keep adding to the pot and the next year the pot paid it all. It probably took a full two years before every pot covered what it was supposed to. 

13thlegion

Setting up pots has probably been the best thing I have ever done for managing my money.

The start can be difficult. Pulling from multiple to meet an expense can lead to an endless cycle as none ever get to their targets.

Whilst putting 1/12th of an annual goal is the ideal, in the beginning for me I was less than a year away from having to meet the varied expenses. For example my MOT and service was 9 months away, and the annual vaccines for the dog were 3 months away. So I had to put 1/9th and 1/3rd of the target away in the pot each month until the date. Things then got a lot easier and went to 1/12th after the first time around.

steven141

I currently have savings pots for:

-House deposit

-Christmas

-Birthday’s

-Emergencies

-Travel card (I pay this yearly as cheaper).

-Spending Money (I split my monthly wage into how many weeks I have until next payday and transfer x amount every week into my spending current account.

-Credit Card payment money. When I spend on my credit cards (usually to get the cashback) I put the money I spend into a high interest savings account until just before the direct debit is due and transfer it into the current account that the direct debit is taken from. 

ChasingtheWelshdream

13thlegion said:

Setting up pots has probably been the best thing I have ever done for managing my money.

The start can be difficult. Pulling from multiple to meet an expense can lead to an endless cycle as none ever get to their targets.

Whilst putting 1/12th of an annual goal is the ideal, in the beginning for me I was less than a year away from having to meet the varied expenses. For example my MOT and service was 9 months away, and the annual vaccines for the dog were 3 months away. So I had to put 1/9th and 1/3rd of the target away in the pot each month until the date. Things then got a lot easier and went to 1/12th after the first time around.

Thank you all, really appreciate your input.

Reading through, I think this (above) is what makes the most sense to me at this point. The car costs and birthdays/Christmas will be upon us far sooner and taking from other pots will just confuse my brain and potentially derail me I think, having to then 'pay back' into various pots. We have a surplus each month to build an emergency fund, so I think initially we will use that surplus to divide the upcoming costs by the number of paydays, rather than 1/12, then start from scratch after they have been paid.