Creating a budget is an essential step to taking control of your finances. Take the next step and organize your savings to keep track of what each saved dollar is for. Giving every dollar a job helps you to stay on budget, work towards your financial goals, and move towards financial independence. Get in control of your finances to live the life you want.
Disclaimer: I am not a financial planner or expert. All information in the post is based on my research, opinion and experiences. Any action you take based on the recommendations from this blog is at your discretion.
WHY you need to give every dollar a job:
Let’s say you have $5000 sitting in your savings account. What is this money for? Perhaps you are saving up for an emergency fund or for other sinking funds (vacation or a down payment for a new home). Have a system that allows you to track with each saved dollar is for.
Let’s look at this money scenario:
Penny has $9,000 in her savings account and she books a vacation for her family for $5000. She now has $4000 left to cover everything else – is this $4000 going to be enough? What happens if in the same time period she needed a car repair and the annual payment for her property tax is coming up? That $4000 is gone and she may need to borrow money to pay for everything.
To avoid going into debt, Penny needs to follow a budget and put money into a “vacation fund”. She should save up for her $5000 vacation without dipping into the other funds. She needs a way to keep track of how much is this “vacation fund”.
Understanding what each saved dollar is for will help you prepare for those annual expenses such as property taxes or insurance. You save up money each month for these expenses.
Perhaps you are saving up for a life event such as a wedding, an upcoming baby/maternity leave, or a down payment for a new home. Organizing your money in a spreadsheet will help you save up for those larger expenses.
HOW to give every dollar a job
There are 3 ways to “give every dollar a job”.
ONE: If you hold your savings in physical cash, then the cash envelope system would be a great option. Create an envelope for each savings category. Every time you get paid, the money saved would be divvied up into the envelopes.
Check out Charity’s post: 21 Cash Envelope Template PDF for Your Budgeting Needs
TWO: Use multiple saving accounts. Check to see if your bank allows you the option to open several savings accounts without extra fees. You can designate each account for a different fund (i.e. for emergency, vacation, kids etc).
THREE: If you hold one savings accounts, then you need a system to keep track of what each dollar is for. Create your own spreadsheet as below. Using a spreadsheet will help you organize and keep track of all of your funds and categories.
Need a refresher on how to navigate a spreadsheet? Check out this article: How to use 4 basic functions in a spreadsheet to create a budget
Here is an example of what this spreadsheet may look like:
The very first row is the amount to be saved from every paycheque (as dictated by your budget). Every time you get paid, you would update your spreadsheet with the amount that is to be saved. For example, on March 15, you transfer $645 into your savings account. Then you would update your spreadsheet on the March 15th row by increasing the value of each column.
Make it easier and automate the transfer of money every time you get paid into your savings account. Take advantage of the online tools to make the process of saving money easier.
Related post: How to Automate Your Finances to Save Time and Money
WHAT to do when you use a fund or reached a certain money goal
Penny has a credit card bill to pay. She can draw on her savings to pay for a certain expense. Penny spent $100 on a gift and another $100 for her kid’s art class. She will take the $100 from the respective categories and then modify her spreadsheet as shown in row #3 dated March 17.
Keep a running total of each column when money goes in or out.
When a money goal is reached for a certain fund then the money can be given a different job. For example, when Penny has topped up her gift fund at $500, she can now put that $25 from her paycheque to a different category.
Once you have a spreadsheet set up, it is super easy to update it when you have money coming in and out. Take the few minutes it needs to continually keep your money organized so that you are in control of your finances. You know exactly how much money you have saved up for a certain fund/expense.
Budgets are essential for controlling finances. By taking it one step further to give every dollar a job will give you even better control by understanding what your saved money is for. This process allows people to save up for an expense instead of going into debt. This will help you stay on budget, achieve your money goals, and eventually reaching financial independence. Be in control of your finances so you can have an easier life.
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Love this, please write more like this again in the future!
Thanks for sharing! This was really insightful 🙂
[…] is in each of these funds. This process is called giving every dollar a job. Take a look at this article to show you how to do […]
Love the idea of giving every dollar a job. So on point. Great read.
Giving every dollar a job is huge; otherwise, it’s so hard to keep track of where your money is going. It’s so much easier to manage your budget when spending is organized and done intentionally. Great tips!
We give every single dollar a job as well. GREAT article girl!!!