Q. Every year I promise to save money for the holidays, and every year an emergency strikes and I end up spending money. How do I open a vacation savings account that I won’t wreck until it’s time?
A. It’s probably too late for this year, but it’s a great goal to want to put aside the money you will be spending for the next vacation.
That was the premise behind the Christmas Club Accounts which was previously offered by banks and savings institutions to help their clients put money aside during the year, said Claudia Mott, certified financial planner at Epona Financial Solutions in Basking Ridge.
For these accounts, a regular deposit would be done weekly or monthly to grow the account until the end of the year, she said.
While these accounts can still be found, you can set up a similar system all by himself, said Mott.
âUse an existing savings account – or open one – so that the money you put aside is separate from your regular bank accounts,â she said. âHaving specific purpose accounts should help protect your vacation account from being used for regular expenses. “
The next step will be to decide how much you want to set aside.
One option is to decide how much you want to save by the end of the year and how often you’ll make a deposit, she said. This will help you determine how much extra cash you need to have on a regular basis to reach your goal.
For example, if you want to save $ 1,100 over 11 months, that’s $ 100 per month or $ 50 every two weeks or so.
A second option is to look at your free cash flow – the difference between your net income and your regular expenses – to determine what you can afford to save with each pay period, she said.
“If you don’t think the extra cash you have will get you there, it might be time to take a closer look at your spending habits to see if there are changes that can be made. free up additional savings, âshe said.
There are apps you can use on your phone, online, or have installed on your computer – some are free, others are paid to use or download – that can help you accomplish this, she said. .
The most important thing is that you find the right tool for you, Mott said.
“An application like Mint.com Logs into your bank and credit card accounts and categorizes most of your transactions each time you log in, making it easy to see where you’ve spent your money, âshe said. “A computer tool like Accelerate requires more hands-on time to download transactions and categorize them. “
Then there is You need a budget (YNAB), which Mott says offers a very user-friendly step-by-step process to help you figure out where your money is going.
And there are other similar tools that you can use.
âIf you find that you need to dip into the vacation savings account to cover unusual expenses, you may need to focus on setting aside savings in an emergency fund or for those days off. rain, âshe said. âThis is another savings account that is used to cover unexpected and unforeseen bills that may arise and provides a cash cushion when needed. “
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Karin Price Mueller writes on Bamboo column for NJ Advance Media and is the founder of NJMoneyHelp.com. Follow NJMoneyHelp on Twitter @NJMoneyHelp. Find NJMoneyHelp on Facebook. Register for NJMoneyHelp.com‘s weekly electronic newsletter.