When I first went flatting, my life was a bit dull while I got used to paying the increased costs that come with this change of life-stage. So in an effort to shake things up a bit, I planned to go on a girls’ trip to an island resort.

My bank had a special savings account for this kind of goal. The ad for it showed a bar graph which had the outline of a plane in the background, and steadily increasing bars showing the balance going up and up and up.

Once my account was opened, I imagined how proud I would feel when the graph for my account matched the one in the ad. How good it would feel, not only to to go on holiday, but to pay cash for everything.

I began as I meant to go on. In the following months I didn’t always deposit as much as I wanted to, but I always put in something, and I never took any money out. My graph wasn’t as pretty as the one in the ad, but it did go up and up, and after a few months I had what felt like a significant sum of money.

And then the landlord gave us notice.

Moving house is never a cheap exercise, and I had no other option but to drain my holiday savings account in order to have somewhere to live.

The account spent the rest of its life with a balance of about 17 cents. I couldn’t bring myself to go through all that again. What was the point? I was obviously bad with money. I had saved some money, but then I had to spend it.

Which, when you think about it, doesn’t make any sense. Paying for a large expense with money you’ve saved is being good with money.

The trick is to have the right savings account in place first. Before the account called “Fiji Holiday”, or “New Car”, or “House Deposit”.

This savings account will never have a beautiful, steadily increasing graph, even though you’ll put money in it regularly.

That’s because you’ll be taking money out regularly to pay for all the large “unexpected” and “unanticipated” expenses that you just anticipated last week.

This savings account is the key to financial stability. It means that your future savings for holidays, cars, house deposits etc can be used for their intended purpose, because they don’t have to be tapped when life happens. It stops you having to pay interest on debt, so there’s more money to put in to the fun savings accounts. It means you can stop worrying about how you’ll pay for the repairs if the mechanic says your car failed its Warrant of Fitness.

The next small step to take on your journey to fix your finances is to either open or rename an easy-access savings account. (Not one with a time delay or penalty on withdrawals).

In MoneyGrit, we call this account Periodic Savings, because it covers all the Periodic (non-monthly) Expenses in your life. But I’ve had clients call it “Revolving Door Savings” so they don’t feel bad about taking money out of it; “Paddle Account” because it will save them when they’re up the creek, and “Cashflow Crunch Cash” because those are the words that best describe to them what the money is for.

Use whatever name makes sense to you, just have the account ready to go. Finding the money to put into it is the next step. That’s next week.

Photo by Pixabay