7 types of savings categories to build into your budget

Do you feel like it’s time for a budget refresh? Giving your budget an overhaul can help build more structure into your finances, improve your spending behaviour, and help you increase your savings and reduce debt.

Budgeting is much more than just spending and saving. It’s all about managing resources effectively and ensuring you can meet all obligations, be prepared for when life happens, set aside money for the future, and of course, enjoy life along the way. Luckily, a good budget structure can make your budget a breeze. Here are 7 categories to build into your budget to make managing money simpler.

1. Sinking funds

Sinking funds are one of the best things you can build into your budget. Effectively, sinking funds help you set money aside for those larger budget buster expenses throughout the year. Car registration, annual memberships, dentist appointments, insurance premiums – you name it. You can create a sinking fund for anything you like.

Just work out how much you’d need for your larger expenses (an estimate is fine if it’s not a set amount) and divide that by the number of paydays you have in a year. Then, on each payday, set that amount aside into your allocated sinking fund. When the expense rolls around, you know you have the money ready to go.

2. Emergency fund

An emergency fund is your classic ‘rainy day’ fund. Money that’s set aside for unexpected costs like medical bills, redundancy, home repairs, vet bills or car repairs, etc. The key with your emergency fund is to only use it in emergencies. It can be tempting to consider using it for a holiday or other expenses, but you need to keep it separate from the money you’re allowed to spend.

Experts suggest 3-6 months’ worth of living expenses is optimal for your emergency fund, but don’t let that put you off. Any amount is better than nothing at all.

3. Splurge fund

Now onto the fun stuff. Your splurge fund is for life’s little luxuries, whether that’s Friday night pizza with the family, or a treat to yourself for working hard on a big project. Setting aside money for splurges gives you the permission to enjoy yourself guilt free, without sabotaging the rest of your financial structure and goals.

4. Holiday fund

Travel is something many of us value, so it makes sense to build it into your budget. You could save for a holiday in a few different ways. You could treat it like a sinking fund and set an equal amount aside from every payday to cover your annual trip. Alternatively, you might decide to treat it as more of a short-term goal, squirrelling away larger chunks of money in a shorter period for parts of the year.

5. Spontaneity fund

Life is unpredictable – in good ways and bad ways. But just like we plan for the unexpected with an emergency fund, why not plan for the good things we don’t expect, too? A spontaneity fund helps you save up a pot of money that allows you to say ‘yes’ to things you might otherwise feel like you can’t afford. Perhaps a friend wants to go overseas for a big blow out 40th birthday, or you want to celebrate something great happening with a night out or a weekend away. When you have money set aside in your spontaneity fund – you can say yes!

6. Adventure fund

Do you dream of taking off for a year, exploring the world, living the nomad life? Don’t just dream it – create it by setting up an adventure fund. Make small contributions over time so that if the opportunity unexpectedly presents itself, you’re ready to take the leap. Even just having an account set up for that big adventure you’ve always wanted can empower you to make it a reality.

7. Future fund

Something we often neglect is saving for the long term. That’s because our future can feel uncertain or too far away, so we find it hard to psychologically connect to the importance of it. Nonetheless, setting aside small amounts over time, even if you don’t know what it’s for yet, can set you up for success slowly but surely.

Organising your funds

How you structure your savings categories is up to you, but most people find having multiple accounts is the easiest way to stay accountable. You can set up multiple EasySaver accounts to organise your money that you move around often, and then have one high interest savings account, like a Reward Saver, for your money that you’re parking long term – like your emergency fund.

So why not get started today and give your budget a refresh. A little bit of time spent now could pay off in a big way in the future.