Annual Savings Account: Why We Have One, & How We Use It

Earlier this year, one of the goals I set is to put aside $5,400 in our annual savings account. I later increased the amount to $6,400, but never explained how I came to that figure. Well now, let’s put an end to that.

Before Hubs and I started using our budgeting strategy, we used what income we had for the month to pay for anything that came up for the month. This included any kids clothing for school, school pictures, car maintenance, medical bills and prescriptions, birthday and Christmas gifts – you get the idea. We had minimal savings too. Maybe $1000 at most. But even that whittled away slowly as we tried to prevent our account from over-drafting certain months. At the time, we were truly living pay-check to pay-check. While we currently don’t live on last month’s income, I don’t consider us living pay-check to pay-check either. Since we implemented our annual savings, our finances right now are not as bad as they once were.

When it was time for me to take a long, hard look at our finances, I wanted to put an end to being broke and not seeming to dig our way out. I wanted to have money set aside for those oddball, non-monthly purchases, bills and expenses. I also wanted money set aside for any gifting expenses we have throughout the year. And I wanted to do all of that, while still being able to get us out of debt.

How to budget it all

I’ve already explained how budgeting with specific envelopes didn’t work for us. We pay roughly the same amount each year, but not necessarily in the same category. This made budgeting with envelopes tricky for us. That’s why we started our annual savings account. Simply put, it is our catch all sinking fund. Not to be confused with our emergency fund.

Each week when Hubs gets paid, I put money into a separate savings account as I’m paying our bills. When we have an oddball expense that’s not monthly come up, it’s able to be easily taken care of. We’re no longer going through everything we have in our savings account, and we are prepared for any non-monthly expenses that may come up.

We bought our house in 2014, and so after a year at our current location, we had a reasonable idea of what needed put aside. As I put aside that money each week in 2015, I also tallied up what was spent in 2015, and in what category. As the year went on, some items we forgot to put in the tally. As I went through and reconciled the bank statements at the end of the year, I must have forgotten some purchases in our holiday haze. This is why I increased the amount from $5,400 to $6,400.

So what did 2015’s annual expenses look like?

Most of our annual expenses come from medical related costs. Between dental, vision, prescriptions and our medical expenses, we paid out $1,964.35, or roughly a third of our annual fund. The largest chunk is obviously vision expenses. For the last 5 years, we haven’t had any vision coverage at all. Hubs and I wear contacts and Bookworm needs glasses, so this gets expensive really quick. Thankfully this will not be the same this year. At the end of 2015, right after we went in for our annual exams, we were notified that we would begin receiving vision coverage.
I’m surprised how little we spent on clothing over the course of the year. That amount includes clothing for the kids because we were attending wedding, as well as for Bookworm’s required concert attire. Even with leaving those purchases in, we spent an average of $11.29 a week to clothe all of us, or $2.26 per person, per week. That’s a LOT less than I thought!
Our propane bill is for our stove and water heater. They come every 13 weeks, and deliver anywhere between 60 & 84 gallons. I’m interested to see how this year compares.
Taxes in our location are expected to increase again this year, for both property and school. For this reason, I used the flat rate for the calculation even though we paid early at the reduced rate. We’ll see how much the increase is this year from last year, and adjust our savings for next year accordingly.
The school category is anything school related that may come up, such as school pictures, year book costs, field trip costs, class projects etc.
So far, our car has needed very little maintenance. Most of this cost {$141} goes to our AAA membership. Some may not agree with spending money on AAA, but to me, this is a prime reason why frugality isn’t a cookie cutter situation. We live in a very rural area and have to travel a ways to get anywhere. I have needed AAA for towing past vehicles more than I care to admit, and it’s paid for itself on one tow. For the peace of mind it gives me while I’m travelling with the kids, I’m more than happy paying that amount each year.
When we bought our house, it came with a pool. It wasn’t the make-or-break reason we bought the house, but it’s a nice perk when it’s 90* outside with 100% humidity. We’re still getting used to not only how to maintain it, but also how much the maintenance on it costs. This will probably change next year as well.
The “FOOD” category isn’t groceries. It’s how much I spent over the course of the summer at our local you-pick farm, at farmer’s markets as well as local orchards. For roughly $6.15 per week last year, I was able to freeze, can and dehydrate a lot of foods that we’re still using in the middle of February. It may be a hectic time of year for me, but the fresh picked food it gives us throughout the remainder of the year are well worth it.
Miscellaneous is where I put costs that I couldn’t find a previous category for. For instance, our Sam’s membership. Taking $100 out of a month’s grocery budget without walking away with groceries is a bit harsh. But if I include it in our annual fund and save up for it over the course of the year, it’s not such a blow to the budget. The $91 Verzion labor charge I won’t be paying again this year. Our internet is slow as molasses because of our rural location, and I wound up paying a technician $91 for that diagnosis.

How will 2016 go?

I already know that I’ve got a $240 propane bill with our name on it for the end of February. There’s also roughly $210 in medical bills from when Lady Bug needed blood work done in January, $200 of it is our deductible. As the year goes on, we’ll see how it all falls into place as most of our annual costs incur throughout the summer and fall.