If you budget, surely you’ve had to deal with the problem of how to track your savings goals. Do you do it within your budget somehow? Do you try to make Quicken do what you want? Perhaps you’ve tried the new Mint.com service?
Part of the problem with tracking savings goals comes from trying to lump all your savings into one or two savings accounts. Maybe you have a regular Savings and a Money Market or something. How do you keep track of how much of the savings is ear-marked for the next furniture upgrade, the next car, or the trip to Disneyland?
I’ve seen recommendations for the approach of using a completely separate savings account for each different goal. For some things, I would agree with this approach. For example, you might have a 401(k) and/or IRA for retirement and a 529 plan for college savings. However, for the short to medium-term goals like furniture replacement, vacation, and irregular expenses, tracking multiple savings accounts can be annoying.
Next problem … if you like to use a simple Budget Planner spreadsheet, how do you track the balance of your separate savings goals? For short-term savings for irregular (non-monthly) expenses like Christmas, there is the technique of budgeting say $50 a month in order to have $600 in December. However, if the money is sitting in a no-yield checking account, you’d be wasting the chance to earn interest. Also, how do you ensure that you don’t accidentally spend the money if it is still sitting in your spending account. Tools specifically built for budgeteers like YouNeedABudget.com can be very helpful. But, now there is another solution.
Enter stage right: The Savings Goal Tracker
In addition to tracking each of your savings goals and charting the progress, the spreadsheet helps you choose exactly how you want each deposit allocated.
For example, let’s say that in your budget spreadsheet or software, you have a “To Savings” category where you have chosen to funnel about $250 per month. In the Savings Goal Tracker, you can assign a specific percentage (%) to each goal so that the $250 deposit get divided based on whatever priority you have set for your goals. You can do this with deposits, interest earned, and even withdrawals. The instructions worksheet says exactly how to do this, in case it isn’t intuitively obvious how it works.
Why isn’t it more automated? I know I’m going to get this question, so I’m going to answer it ahead of time. Quite simply, I avoid using VBA macros in spreadsheets like the plague (for many reasons I don’t want to get into here). I figure a few extra clicks of the mouse per month won’t hurt anybody. Unlike a spending account, you probably make fairly infrequent withdrawals and deposits to your savings account. So, adding 2 or three transactions per month manually is a piece of cake.
How Does This Compare to Quicken?
The process of allocating or “splitting” a deposit between various savings goals is similar to creating a “Split” transaction using Quicken. Perhaps there is a better way to do this with Quicken, but in Quicken you can set up a “Savings” category with separate sub-categories like “Vacation”, “Christmas”, etc. for each of your separate goals. When you make a transfer to Savings, you can record it as an expense (rather than an actual transfer) and use a Split transaction to assign various amounts to the different categories. When you run reports, you can see the total amounts added to these separate categories. There are still problems with this solution, though, which you are probably familiar with if you have tried this approach.
In the Savings Goal Tracker spreadsheet, if you have your % allocations defined ahead of time, it is actually faster to use the spreadsheet than to work out the split manually in Quicken. Also, the chart is automatically updated, so you can switch back and forth between the tabs a lot faster than you can create reports with Quicken. Tip for Quicken users: If you want to use both tools, you can use the spreadsheet to help you calculate the values for the split in Quicken.
Now if there IS a way to track savings goals easily in Quicken, I’d be more than happy to find out. I’m still an avid Quicken user. I do like Mint.com’s approach, but I prefer to do my planning offline as much as possible.
Try the savings goal tracker, and let me know what you think.