//This blog post was written by Joe Ziska – I loved this idea so much that I personally implemented it with my ING accounts!//
Q) What two things do the following have in common?
Christmas; A flat tire; Your son going to college; Vacation in Hawaii; Your daughter getting married
A) 1. They all cost money. 2. We forget that they cost money until the bill comes!
Let’s face it. Even the most organized of us tend to forget things now and then. Whether misplaced car keys or forgotten reservations for Valentines Day, our imperfect memories always seem to make life more difficult. In my experience, forgetting large upcoming expenses is one of the most demoralizing things that can happen to you. Unlike true emergencies, such as a sudden illness or job loss, known upcoming non-monthly expenses (KUEs) such as these listed above, can and should be expected! As Joe always asks, “Should it be a surprise if your car breaks down?” Of course not. That’s what cars do!
Many of you reading Joe’s blog are trying desperately to get out of debt and gain financial freedom. For my wife and me, one of the most disheartening things in that process was a big expense wiping out our emergency fund. Just when we felt we were finally getting traction, a $500 car repair or having to pay for Christmas presents would knock us off course. We constantly felt like we were starting over. I knew that we should be saving for these expenses but didn’t have a good way to separate this from our emergency fund. We’d generally leave a decent balance in our checking account and just hope that it would absorb most of these expenses when they came up.
I wanted to save for these KUEs. However, the mathematical part of me rebelled at the idea of gaining no interest on our savings (especially as some of these expenses can be quite costly). Wouldn’t it be better to just pay down some debt or invest the money?
Enter ING Direct. I’d been using HSBC and ING Direct to earn good interest on money we were saving for a down payment for our house. However, it wasn’t until almost a year after opening our accounts that I realized how they could help with my KUE problem.
One day, I was checking my account balance online and I noticed a large button labeled “Open an Account”. I figured this was used for investing or to open a new CD but clicked on it anyway. After browsing for about 30 seconds, I realized that ING will let you create numerous new savings accounts linked to your original account. Not only that, you can give each a unique name to help you identify them. We created categories for all of our Known Upcoming Expenses to keep them separate from actual emergencies. Below is an example screenshot from an account (click on it to see it better):
We have also set up automatic transactions to each individual account. So now, at the beginning of every month we move $12 to our pet fund (unfortunately, our dog doesn’t pay her own vet bills), $40 to our Christmas fund, and so on. When we need the money for these expenses, it takes only 3-4 days to move it back to our primary checking account. Meanwhile we’ve been earning interest on our money instead of paying interest to a credit card company when these events sneak up on us. Last time I checked, Christmas is still in December so you’ve got 5 months to save up for all those gifts. Why not create an ING account for it and make it automatic?
========= End of Guest Post by Joe Ziska ===========
Thanks for the article, Joe!