We’re working on some concepts for offering intuitive and simple savings workflows as part of our core supported product template portfolio. One thing we’re eager to get your feedback on is how you think about savings.
Please note, because retirement/investment (long term) savings are much more complex, we’re initially focusing on a short to medium term/lumpy expenses perspective (e.g. property taxes, next car, vacation, college, etc).
As it relates to short/medium term savings and lumpy expenses, do you prefer to save using an “envelope budgeting” method (e.g. money in a category that’s left over/unspent from last month is available this month and you see it accrue or “saved up” over time) or are you just wanting to know the money you have set aside for a specific expense, item, event, or goal is available in your bank account(s) and see how you’re tracking toward that goal (e.g. I want to see that I have x dollars in my separate vacation fund and that checks out with my real account balances)?
As you’ve tracked your savings in Tiller or other tools, are you making transfers from a checking account into an actual savings account, or is everything saved in one single account, like a checking account?
If you could wave a magic wand, what would your perfect savings workflow in Tiller look like?
My perspective might be different because I’m retired and working off of my planned “liquid budget” - funded from my investment and retirement accounts which may not be fully liquid. I’m always projecting my expenses to the time of my next contribution from my investment or retirement accounts to ensure I can cover them. If I know I have an irregular expense coming up (planning a vacation, home project) I want to be sure I’m liquid enough to cover.
So what would be helpful for me is a dashboard (or workflow) which projects my expenses (from historical), updates based on monthly actuals, and tells me when i would be running short in my checking/savings (liquid) accounts. This may be a reverse savings workflow?
I typically like plan investment/retirement withdrawals at least 3 months prior due to financial market changes.
So I look at lumpy expenses in terms of total available liquid funds for budget + lumpy expenses forecast out during the year. A little bit of Category Schedule, Budget Plan & manual updates? If that all makes sense.
I use the Savings Budget sheet for zero-sum envelope budgeting and smoothing out budget and expense spikes that occur with semi-monthly or longer recurring expenses.
When budgeting, one of the most time-consuming tasks in dividing up the spikes is layering multiple spikes in the same category into a single budget. There are some fantastic sheets people have developed to aid this workflow, but I’d love something more integrated.
In my past, We have created various savings accounts to save monies from each paycheck in order to meet our goals (children, grand children, property taxes, projects, vacation, etc). I found this cumbersome and too much work. I was also at a point in my life where we lived pretty much paycheck to paycheck. I am still working although close to retirement and could see following a pattern depicted by Isussman 1228 above. I use categories and sub-categories in Tiller to track discretionary expenses so I have a pretty good idea of what my required monthly/annual spend will be, but will want to be prepared for an unexpected event (ex: medical or auto mechanical). Goal is to have and track money in a cash account for any future planned expense whether required or discretionary. Not to carry an excess as available cash but just enough and know when we can execute the desired discretionary spend.
Headline: we maintain multiple investments accounts and but only one cash savings account. We do not use multiple savings accounts nor multiple categories to track individual savings goals. I found that to be too tedious and unnecessary.
If interested, I will lay out my Annual Savings Plan and my Monthly Savings Process against that plan in further detail below:
Annual Savings Plan
Set annual goals for Investment accounts based on Portfolio Allocation goals and tax efficiency:
- Tax Deferred Retirement Accounts
- HSA Account
- Taxable Accounts
Set minimum dollar balance for Cash accounts.
High Yield Savings - 3, 6, or 12 months of expenses
- We are currently holding 12 months because of cash centric, economic environment and some major home changes that are in process
- This account is also used for large annual expenses such as property taxes and if for large purchases although that’s fairly rare.
“Cash Buffer” in Spending account - 1 month of gross household income
My “Cash Buffer” process is probably where it might be unique from others. In effect, this cash buffer acts as an immediate savings account if for some reason we have a spike one month on an expense that hits out of the blue or simply was not planned or expected. It’s just not feasible for us to try and match every dollar of income against every dollar of expense on a month to month basis. Too much variability.
Some would not want to do this and rightfully point out that you lose out on earned interest by not having this money in your high yield savings account. However, it’s a cost/benefit outcome where I valued the convenience of not having to do bank transfers vs losing out on the higher earned interest I would have received on it. (My HY Savings Account is with a different institution than my Spending Account.)
As a result of using this Cash Buffer process and to echo cculber2’s post about smoothing month to month spikes, I rely on the Savings Budget template as part of my monthly financial process. (Disturbingly, I also find using the Savings Budget process to be fun vs a more traditional process.)
It took me a minute to figure out how to handle my Cash Buffer use case, but I ultimately set it up as Type>Expense and Group>Savings. I tried it as an Income and a Transfer Type as well and the process didn’t work for me so it ended up as an Expense.
Here is my monthly savings process in a nutshell although I have a more detailed step by step script I’ve written to have for reference:
Monthly Savings Process
- Smooth spikes by reallocating money from over budgeted Categories to underbudgeted Categories.
- If I still have anything in the red, I then take money from Cash Buffer and give it to the underbudgeted expense account.
- Con: The main process con (and this simply might be me not figuring it out how to account for this) is that the Budget numbers for this line item on the Categories sheet reflect the amounts I’m subtracting or adding to Cash Buffer and not the actual balance of the Cash Buffer. Thus, my Cash Buffer number really only exists on the Savings Budget sheet and just floats month to month there.
- If Income exceeds Expenses at end of month, I follow this hierarchy for moving that cash:
- Transfer Out to Investments (see 1 under Annual Plan)
- Transfer Out to HY Cash Savings (see 2a under Annual Plan)
- Reallocate to Cash Buffer (see 2b under Annual Plan) - If my Cash Buffer begins to grow to the point that it’s more than my 1-month gross income balance goal, then I simply move that excess into Investments or our HY cash savings account.
- At the end of every month, I reassess my budgets in Categories to determine if I need to make any adjustments because excessive use of the Cash Buffer Category means that I’m mis-budgeting or something has changed that I haven’t noticed.
Hope this helps. Good topic.
I would be interested in hearing more from @heather about what they’re thinking. I am unclear how Tiller would add this capability to the Tiller Feeds. That seems like it goes against how Tiller is used.
Thanks @richl - these are detailed and insightful replies but most seem very much focused on long term savings (investment) or using investments as part of a workflow and seem complex. I do really appreciate the replies.
We are trying to build a workflow (most likely just one or maybe two spreadsheet templates) for helping people understand how far along they are toward meeting their short to medium term savings goals that is simple and intuitive and generally does not involve investment accounts.
I have this idea that an “envelope” is distinct from a “savings goal” and am trying to assess whether our community can also align that they’re separate concepts.
Basically, we need something simple, that most people can get behind and understand how to navigate all the moving parts. The more moving parts there are the more likely people will be to fall off and it not be helpful.
Thanks Heather. To me a Savings Goal and and Envelope are the same thing. In my mind, it is just about allocating money to a defined purpose. It can be a vacation or next months groceries. The only thing that changes is the purpose. What in your perspective that makes them distinct things?
I’m in the different accounts camp. I like to have an account with an amount that I contribute to for a defined savings goal usually naming the account such. I would like to see something that you could set goals with and the transfers into a particular account could automatically show you closer to the goal. I would think it would need to be based on an account balance in my usage because all of the transactions would be classified as transfers although this could be transactions and categories if needed.
My current plan of attack is to have automatic transfers set up weekly into the general savings account and then I transfer different amounts over to individual accounts depending on upcoming forecasted expenses and or savings goals. This general savings account is also my “cash buffer” savings that I will tap into as needed, this is usually to pay off monthly used credit cards since most of my expenses come in through credit card usage for the rewards aspect.
I do need to admit that I have not really used any current workflows for savings, so this may already be a possibility. I have considered the savings budget, however I usually let my groups overall amount absorb any of the overages in a month. Individual categories can ebb and flow without too much trouble.
I think my magic wand workflow would be a mixture of inputting expenses/categories for assisting in cashflow forecasting, transfer recommendations for the savings amount based on predetermined goals, and someway to match these actions once the transfers or such hit the accounts balances/transactions coming into my spreadsheet. If that makes sense.
My magic wand solution would be to have another Category type: Income, Expense, Transfer, and Savings.
With that, the specific savings buckets would be covered by the category/group assigned, and these savings amounts can be tracked alongside income/expenses in future templates but as their own third thing - not as the transfer/income/expense riddle they are currently.
I do think that envelopes could be used for savings goals but making them distinct for the reasons below seems more simple and intuitive to me, but I’m not sure that everyone would agree, hence this Discussion topic
I also have a hard time reconciling that a true envelope system just uses physical cash, and that is in no way suitable for a digital spreadsheet. Envelope budgeting as a broader concept way before Tiller was originally intended to be a strategy used to help people stick to a budget, not save for goals.
To me, Savings Goals are things like a trip to Hawaii, new car, or a kitchen remodel. These are things that people are excited to track and see their progress. They don’t represent obligations or regular expenses, may have a deadline set, or represent long term dreams. The idea is that you set a goal to save $X and watch the progress as the months tick by or have the ability to create a plan to save $X by a certain date.
Envelope Savings on the other hand is left over money usually associated with an expense type category and may accrue after a month closes if there is anything left. These might be lumpy expenses like property taxes, or whatever was left over from the groceries envelope last month that’s available this month. They tend to be related to obligatory or discretionary spending, but do not represent items that are necessarily exciting or need progress visualizations outside the current month.
This is also where the cognitive dissonance comes in with this not being a physical cash system. What if you go over with an envelope? There is a lot of complex math involved to reconcile that against your bank account balance in a spreadsheet. With physical cash, if the envelope is empty, it’s empty and maybe you borrow from another envelope but the math is really freakin’ easy!
Envelopes also aren’t likely to have corresponding transfers and often aren’t “achieved” after X amount of money is saved.
I think the biggest distinction is wanting to see progress toward a set goal vs just how much is available in an envelope. In the Monthly Budget we currently have it’s hard to display overall progress toward a goal so this would require a separate spreadsheet template where you could set a target (as distinct from a monthly budget amount - the amount you need to set aside each month to achieve the goal) and track your overall savings against the goal’s target.
Maybe this is more complicated, I don’t know. Maybe we just need our own thing that encompasses both concepts like a “bucket” or something
Well as a long term user of the Envelope budget methodology, I can say:
- I have never used paper envelopes.
- I never user Cash
- I absolutely use the Envelope process for fun things like Vacations.
Here is a view of my Envelope Sheet that shows exactly what you are wanting to show. What is my Goal (Savings Target)? and How long until I achieve it given my current budget? Not just what the current balance is.
I have used this for Vacations, Cameras, Furniture as well as the very boring things like Property Tax, Deductibles, and Emergency Funds. I also use this method for both normal Checking / Savings Accounts and Investment Accounts.
You are right though, it is possible to over spend an Envelope. I do it all the time. For me this shows up as a Negative Balance and I know that in order to actually keep my envelope and accounts in balance I will have to move money around. However, this is no different than real life.
Here is a real life example of one me and my family always go over on. In order to stay in balance with reality, I will have to find the money from another Envelope to cover the delta
I agree with you though, their is a initial view of Envelope Budgets as a legacy way of doing things, but honestly it really is flexible and will work in todays digital / credit card world.
Great Discussion Topic
I use a combination of:
- savings buckets for sinking funds, lumpy expenses like insurance payments where I know the annual amount but it isn’t paid per month, I fund these every month via expenses. I don’t care about my progress, as I’ve already calculated the necessary monthly expenses to fund them
- savings buckets for discretionary funds, like travel, where I lumpy spend whatever’s in the bucket. Some of these I fund with expenses, some with bonus money. There’s no progress with these, whatever’s there is there.
- regular expenses for things about the same every month. I don’t use savings buckets for these, just estimated expenses.
These are spread across a checking and savings account.I have a custom spreadsheet that tells me (a) what I need in my checking account for the next month based on my CC auto-pulls from end of month balance plus any ACH pulls (like mortgage payments), and (b) if my savings buckets are fully funded by my combined checking+savings accounts.
If I had a magic wand, most important to me is to know the value of my accounts minus my savings buckets, so I know if I have a surplus/deficit. Second is something that helps manage the balance between checking and savings, so I can optimize my savings balance.
Second tier wish is make savings buckets easier to pull into a supplemental spreadsheet. Right now I need to calculate all expenses year to date + the budget adjustment journal. If there was something like a “savings balances” I could reference, would be much easier.
I use the Savings Budget for rollover budgeting (the best way IMHO). Like others, when saving towards a goal it is simple an expense category. I have to keep a mental note of what I need by what date. So I love the idea of a savings goal tracker.
There is a progress bar on the Savings Budget. I would love to be able to define a goal by a date for a category and have the progress bar represent the progress towards the next goal for that category (this may align with the above suggestion of a new savings type category). And it could support multiple goals per budget category. For example, I have a Travel category and I have two trips I want to save up for over the next year. I would like to set goals for each trip but use only a single budget category for saving up the money.
Lastly, eventually, I will spend that money but don’t want to lose track of the successful savings effort that was achieved, so my magic wand would account for that also (a different sheet where these goals are defined and the results of the saving effort would be recorded perhaps?).
Fascinating to see what other folks do.
When I was a Mint user I utilized different savings accounts as a form of envelope saving. In essence I was tracking balances on each account to monitor savings levels/goal progress. In a low-interest/low-yield environment this was a relatively simple method. Now that we have higher interest/higher-yield I have considered lumping all the “savings” funds into a single account to better leverage compounding interest. However, this would mean that I would lose the ability to track individual balances.
I think it would be useful to set up a worksheet that would allow you to break down the balance associated with an account into designated dollar amounts (or dollar amounts based off a certain percentage of the total balance). This might be a lot easier than having to transfer funds between different accounts for the purpose of tracking the account balance or having a transaction category designated as an “expense” to track savings goals.
Anyone remember Simple banking? They had a something like this in their account UX. You could designate savings goal and then track progress. I don’t remember if it actually involved Simple moving your funds to a different account but there was a way to designate funds for a purpose other than spending on budget categories.
I’d be interested in exactly the same feature set. I use a variety of savings accounts to hold money for ‘lumpy’ expenses that occur throughout the year. Things like property taxes, life insurance, Christmas spending, etc. I’d love to be able to combine all those dollars into my high yield savings account, but tracking those sub accounts vs. the total balance is a nightmare. So far I haven’t found a good construct within Tiller to do this.
My $.02. YNAB does a great job at envelopes and savings. They are completely related, IMHO. I find a proper budget is the precursor to proper savings. I am not sure the UX of tiller bides itself wait to envelope budgeting (it’s much much more intuitive on YNAB).
I hope you can take queues to make budgeting more efficient from products like YNAB when making savings features
Wow, a new transaction type! I like the sound of that. That line of thinking makes me wonder if native support for 50/30/20 budgeting could be a possibility…
I gave this some thought and was thinking of a new approach.
WARNING: This is from the left field so forgive me.
I’m thinking rather than a new Savings sheet we update the monthly and annual budget sheets.
Problem might be that we are trying to close out the budget at the end of each month when it actually continues from month to month.
Add a net column(s) to the monthly budget and annual budget for starting balance.
The starting balance for mote expenses or savings goals would be zero in January except for spending goals that extend into the new year. At the end of January whatever is available gets copied into February’s starting balance whether it is positive or negative. This would be carried forward throughout the year. This would work for lumpy expenses or long range goals. Manual intervention could be done at any point in the year by reallocating budget funds.
I have illustrated on a sample annual budget page.
My apologies I don’t mean to turn over the apple cart.
What you are describing and what @sethgoodrich is describing is largely already done with the “Savings Tracker” sheet. I have no idea who made that and the Learn and Discuss link on it is dead, but I’ve had it sitting in my spreadsheet for a long time. I coincidentally pulled that up last week, modified it a bit for my own purposes, and now use it to track towards savings goals exactly as you describe.
Pick the Category, set the Accounts, leverage Tags, set your annual monetary goal and then it tracks it using progress bars showing you what you’ve saved YTD vs what’s left to save against your goal. This assumes your Accounts, Transactions, and Categories are already set up the way you want them to hold the dollars you want to save.
I assume you can see this sheet on your end? It could use some updating for sure but it might be a good kernel sheet to start with and update from there. It’s separate from the Savings Budget so you can leave the Savings Budget as is.