Savings

Savings (other than life insurance) - 10 per cent of income

Moving from expenses to savings, the authors of The Manual take an interesting tack when it comes to the kinds of things that qualify as "savings." I'd never really thought of it like this before, but they count payments on the principal of your mortgage as savings. Makes sense. Unlike us schlups in Apartment Land, you homeowners are building equity every time you make a mortgage payment - at least with a portion of that check! Here's a rundown of the other things considered savings:

Another column of your tentative budget lists savings and investments. Figures for payments on property (exclusive of interest), annuities, endowment policies, life insurance, stocks and bonds, deposits in the savings bank and your reward fund are entered in this column.

Well, I don't own any real property. I'm also not building any kind of annuity or endowment policy, but - as a state employee - $151.72 is deducted from my paycheck every two weeks ($303.44 per month) and deposited in a state retirement account. That money is mine should I leave the state's employ at any time, so I guess we could consider that an annuity of sorts. Life insurance will be considered in my next post. I don't purchase any stocks or bonds. During the past month, I've transferred a total of $187.50 from my checking to my savings account. My total savings during the past month then are $490.94 or 13% of my gross monthly income of $3666.67. Good news! Though I doubt my savings would be quite this healthy if that retirement contribution wasn't whisked away without my even seeing it, I'm toeing the 10% mark set forth in the "pattern" budget.

Some families whose incomes boast a small surplus, or who can "manage" to reserve a few dollars over and above expenses, like to build up a separate bank account as an emergency reserve or "balance wheel." This account should never be drawn upon for minor emergencies or to make up deficits. Authorities recommend that $500-$1000 be built up and maintained in this account.

There are various types of savings accounts described by the authors of The Manual. The first is your basic emergency reserve. $500-$1,000 may not sound like much, but in today's dollars it's actually more like $5,921-$11,841. Wow! My emergency reserve only totals $500 - and I was darn proud of having put that aside for the first time in my life! The figure recommended by vintage "authorities" is closer to the "three to six months' expenses" often cited by financial experts today. I'm falling far short of the mark of a healthy savings in this respect. I built that small emergency reserve by transferring $25 each pay period ($50 per month) into that account and stopped when I reached goal. It sounds like I'd best go back to doing that. Pronto.

One dollar a week seems a minimum amount to save, and as income increases one should save up to one dollar in every ten dollars earned or more; these savings should go part into life insurance and part into the "balance wheel" account.

$4 per month in 1945 dollars = $47 today. So $50 sounds like a reasonable contribution on a monthly basis toward building a more healthy emergency reserve.

Another type of savings account described by the authors of The Manual is a reward fund - or a fund designated with specific expenditures in mind:

The reward can be big or little, ranging from a new set of dishes to a car or a house. You may decide to make a five-year plan or a one-month plan, depending on the goal. The important thing is that a reward is in view. This reward should be of interest to the whole family, of course, and a council should be called to decide on something that the majority are eager to have.

Get the family together and list everything that everybody wants: the clothing items each one needs; new equipment for kitchen and laundry and tools for work bench or garden or garage; household furnishings for living room, dining room and bedroom, whether repair of old or purchase of new; a rug, a picture or a musical instrument; and then personal needs - for games at home and sports outside, for recreation, for arts and crafts, for reading, music, plays and movies. Of high importance are books, magazines and lectures that will aid father in his vocation and mother in her homemaking. When the lists are made, discuss them in a breezy family round table and choose the most important items to try and secure month by month for next year. Many will have to be deferred, but why miss the thrill of thinking that we will have it too! Such goals are good for family ambition. Some things desired can be made at home; free books and magazines are awaiting us at libraries, free lectures and music are available for the asking or the arranging of a committee to provide them which we might help establish. Once the goal is established, set the date for achievement, and plan to put aside a certain sum each week or month until the reward is won.

Now you are ready to construct the rest of your spending plan, in order to find the ways and means to save the reward fund. You may find so many small "leaks" after a month or so of budgeting that the reward fund will accumulate more rapidly than you had hoped.

My reward fund started out as a relocation fund. I hated feeling trapped in this town and wanted to build enough in a savings account so that moving "home" would actually be an option for me one day. These days, relocation is not a priority. To be frank, I have a hard time imagining living 3,000 miles away from my darling Kitten and Poppet. For any reason. So the relocation fund has become the money I'm planning on spending to feather my nest this year. To buy some new furnishings, a new mattress and boxspring, maybe do a little decorating. I've managed to sock $2,256.76 away over the past nine months. (Funny - I guess I started building that account just about the time I started my vintage fitness and reducing plan. I hadn't realized that!) Next up: Life Insurance.