Welcome to Day 20 of the 30-Day Financial Wellness Challenge.
Each day will comprise of financial exercises, some short and others a bit longer, to help you become financially fit. The goal is to tackle different aspects of personal finances one day at a time.
After the 30 days, you’ll have a stronger understanding of your financial health and an action plan to improve your financial wellbeing. Review Day 19: Financial Goals.
After completing Day 19 of Phase 3, you’ve identified value-added goals. We’re now in Phase 4 of the challenge addressing the tactics to achieve your goals.
In the Planning Phase, you’ll learn the following:
|Save More||Increase your savings and cash ratio|
|Spend Less||Prioritize expenses and improve cash flow|
|Pay off Debt||Lower your debt-to-income ratio|
|Start Investing||Invest to grow net worth|
|Retirement Savings||Secure your future|
|Budget Better||Putting it all together|
On day 20, you’ll learn how to save more.
During the financial health checkup, you calculated your savings rate and your cash ratio. I want you to reflect back on those two financial health numbers. What were your results? Do you feel secure and confident? Did your numbers help you identify savings opportunities?
You may have identified a number of savings goals. So you might be wondering where to start? Let me introduce you to the purposeful savings plan.
Save More with the Purposeful Savings Plan
With the purposeful savings plan, you save for emergencies and for your short-, mid- and long-term goals identified on Day 19.
This savings plan is about being specific on how your money will be used to achieve your mission. The plan has four distinct savings goals to consider:
- Rainy day fund is a type of emergency savings account. It helps you cover expenses related to unforeseen events. I suggest having the equivalent of your auto insurance deductible. For example, if your auto insurance deductible is $500, have $500 in your rainy day fund. After using the money to cover expenses, make sure to replenish the fund.
- Opportunity fund is another type of emergency savings account. The fund helps you cover basic living expenses if you lose your job, hours are reduced, or your sick, disabled, or hospitalized for a period of time. It’s called an opportunity fund because you regain back the time you once spent at work to deal with your situation.
- Experience fund is two-weeks of salary to cover expenses related to vacations or long weekends. You need time away from work where you can disconnect and recharge.
- Freedom fund is a savings account I recommend for everyone. The goal is to save enough money to cover your living expenses for an entire year. Freedom is the opportunity to leave a job to explore new interests or take a sabbatical to spend with loved ones.
Day 20 Assignment
Let’s get you started on how to save more.
Don’t have a savings account? Open your first savings account. Find a savings account on the financial marketplace or open new savings account with your existing financial institution.
- Start your Purposeful Savings Plan
- Set up separate savings accounts for each fund and title it accordingly.
- Determine the amount you need.
- Calculate your monthly contribution to each fund.
Purposeful Savings Plan
|Amount Needed||Monthly Contribution|
|Rainy Day Fund||$|
Save More Tips:
- Set up automatic transfers each payday into the accounts. If you’re paid twice a month, divide your monthly contribution by 2 to get your per paycheck transfer amount.
- Max your savings with any found money. Use bonuses, gifts, coins from the street, pay raise, income from side gigs to add to your goals.
- Calculate your new savings rate. After a few months of saving into the funds, calculate your new monthly savings rate. Compare it to the previous monthly rate from Day 5. This will help you see how you’re impacting your financial vitals.
And that concludes today’s challenge.
- Calculate your new monthly savings rate
|Last Month Savings Rate (Day 5 Challenge)||Current Savings Rate*|
|Total Monthly Savings||$||$|
|÷ Total Monthly Income||$||$|
|= Monthly Savings Rate|
|(multiply saving rate *100)|
*When calculating your current savings rate, make sure you include all monies saved into your other goals and retirement.
- Create a positive habit of savings and live better
- A simple plan to save automatically
- How to save money using multiple savings accounts
- Get a copy of my book, You Only Live Once: The Roadmap to Financial Wellness and a Purposeful Life. Learn more about having a vision, clarifying your values, and following a money philosophy.
- Qapital Goals helps you set up multiple savings goals with activity triggers. Set up automatic transfers or savings when you complete a task. Helpful savings tool but cost $3 per month.
Next Daily Challenge: Day 21: Spend Less to Achieve Goals
Save More Frequently Asked Questions
What if I don’t have enough money to start saving for all four funds?
Start with the rainy day fund. Set yourself up for success. A rainy day fund is the savings you use for those unexpected bills that arrive or for those flat tire emergencies. I suggest using your auto insurance deductible as the goal amount. This ensures you at least have enough to cover the deductible to retrieve your car after autobody repair. Don’t have a car? Set a goal for $500. Once you’ve reached the goal, increase to $1000. Then start your Opportunity Fund.
Do I need to open separate savings accounts?
Yes. In order to save purposefully, you want to identify the reasons why you’re saving money and have the fund separated. This will can help prevent you from dipping into one fund for another purpose.
How many savings accounts can I have?
Have as many accounts necessary for every savings goal you’ve identified. For example, you can have a home, car, marriage, holiday, and birthday fund. Some financial institutions may limit the number of savings you can have with them. But I’ve found many financial institutions have limits of 20 savings accounts per customer. That’s more than enough and you may not want too many either. Remember you’re prioritizing your most important savings goals.