Saving up mini funds for large yearly expenses

January 7, 2009 at 9:53 pm (budget, emergency fund, tools & tips) (, )

I’m trying to resolve the logistics of saving not just an emergency fund, but extra money for unexpected vet bills, car expenses, and gifts for the end of the year (xmas), plus a few other small categories. Originally I was going to dump them all in one big lump fund, but I started thinking it would be hard to manage the whole shebang, especially as they are used or built up (and before they are full). One lump sum wouldn’t really mean anything, all jumbled together like that! I decided the best method to handle this was to save categories in separate accounts. But to open 4+ savings accounts seems ridiculous! Instead, I will be saving up each separate “fund” in cash. Maybe I’ll start a piggy bank collection (after all, they are *so* cute), or just put them in various envelopes. I am definitely going to keep them separate from the emergency fund, which is strictly for emergencies beyond yearly car maintenance (as unexpected as those can be).

Here are the totals I’m thinking of establishing:

Car: $1200 (originally I had thought $1500, which seems too high)
Pets: $500 (just for emergency vet bills)
Gifts: $500 (xmas + anything else throughout the year)
Clothes/Shoes: $400

I may need to increase the clothes/shoes. My danskos have a huge hole in them that I’m just living, and they are my everyday winter shoe. I wear chacos in the summer and the sole is almost in 2 separate pieces (they are in exceptionally dire straights), and my running shoes are not really healthy to use for running; the padding is very very worn. Total for all three should be about $250-$270. That doesn’t leave much for major clothes purchases, but I think I can manage; I’ve been becoming a thrift store queen lately. I think the key is to shop at least once a month to keep the wardrobe fresh, replenish worn or stained clothes, and keep finding enough, as thrift store selections are severely limited.

To accomplish this, I started out with my regular monthly expenses (for the car, nothing; for the pets, I have a $90/month food and care budget). Then, I extrapolate that for the year, add the extra fund amount, then divide by 12, to get a monthly category budget. I’ll be making some adjustments from my December budget. When the end of the month occurs, any unused amount (between actual spending and what I’ve budgeted for) will go directly into the mini fund. Thus, if I didn’t spend any money on the car (gas has its own category), and it has a $125/month budget, I will put that entirety towards the car fund for the year.

Once the fund total is reached, no more saving in that area will occur. I will put all unused money beyond a full category fund towards debt repayment. For example, with a $125/month car budget, once I meet my $1200 car fund, any unspent money in the car category in the next month’s budget will go completely towards debt. When I finally do need to dip into that category (for expenses that are larger than the monthly budgeted amount), I can take it out, then replenish as needed. This may not occur until the next month’s budget, but it will happen. Best of all, a big expense one month won’t require dipping into the emergency fund (which should be strictly for actual emergencies), AND I won’t have to stop debt payments OR pay with credit cards. It may take a few months to get up and running and be a useful enough size (since I have zero saved at the moment).

This idea just happens to coincide with the new year, so starting in January will work out fabulously. After this year, I expect I’ll have money set aside as needed in plenty of areas so that I can hedge against all those annoyingly large unexpected, last-minute spending needs that usually wreck the budget.

Do any of you already have such mini-funds set aside?

I hope this idea of compartmentalizing funds for different spending categories is a useful idea. I’ll report back later on with an update on how it’s all going. It’ll be frustrating to concentrate more on saving money than actually putting money towards debt payments, but in the long run I think it will be a good idea.



  1. Money Funk said,

    Mary Hunt’s Debt Proof living may prove useful to you. Libraries usually have it stocked if you’re looking for a frugal read.

    She has a section about saving up mini funds. It is done through one account and a notebook where you list each mini fund and their corresponding allotments. This way your Notebook will express how the funds are divided in your One Main Account.

    Check it out!

  2. Shandra said,

    I have a sinking fund set up at ING Direct for this very thing. I have it all in one account but an Excel spreadsheet keeps up with the totals.

  3. R.A. said,

    Have you thought of ING Direct Orange Savings account(s) to put your mini funds in? I have a couple set up for things like car maintenance, doctors co-pays, etc. and its all through one main account. ING makes it really easy to set up extra subaccounts to do this type of budgeting with.

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