Now that you know what the Champagne Fountain Saving Technique is, it’s time to get specific.
Contrary to popular belief, you don’t have to be a financial advisor to apply this system to your own life.
Read the steps below to see what you need to do to start saving.
How to implement it
Banks like Capital One 360 allow you to create several sub accounts. You can name these anything you want and transfer money easily from one account to the other. This provides a great visual to see how much you have in each account. Other banks offer short-term and long-term accounts where you can store your money. You can also call your bank and see what options they have.
Another method is to set up a separate savings account for your various funds and use an Excel spreadsheet to track how much you have in each account. This is a more time-intensive method, but will also allow you to have a more hands-on approach with your money.
If you’re a responsible and experienced saver, using an automatic savings option is an easy way to make sure your money is going to the right place. For example, you can have your paycheck divert a certain amount or percentage every pay period to your savings account. That way, you don’t have to manually save to watch your funds grow.
If you’re still adjusting your spending habits to allow for more saving, a more proactive approach can help you clearly see the benefits. Every month your savings will grow and you’ll feel more accomplished each time you check your balance. Some people like to create a visual example of their goal (like a savings thermometer) to give them encouragement when it seems like their goal is far away.
How to track and manage it
The best way to start saving for your funds is to automatically distribute a certain amount every month. If you count this distribution as part of your monthly budget, you’ll have no excuse to not meet your goals. You have to make saving a top priority.
Before you go shopping, buy groceries or even fill up your gas, tank you have to find a way to fund your goals. Once you make saving a regular habit, it’s easier to add new goals and even increase how much you put away.
You should also plan what to do if any windfalls come your way. If you get a big tax refund or a bonus at work, will you spend it or add it to your down payment fund? If a relative dies and leaves you a small inheritance, where will that money go?
When you receive an unexpected sum, it’s easy to rationalize spending it on something frivolous. Thinking about this situation ahead of time ensures that you use logic to decide what to do with the money. Plus, it’ll help you reach your goal faster than you thought.
Some clients decide that if they earn extra income or receive a large check, they’ll put 90% of it toward their latest savings account and splurge with the remaining 10%. This allows them to still have some fun, while also taking advantage of an unexpected savings opportunity. You can even use this technique if you receive an annual raise. Instead of increasing your living requirements, put that money toward your goal and add it to your monthly savings total. You can also use a raise as an opportunity to save for something new, like furniture for your living room or a bathroom remodel.
When something goes wrong
Once your systems are set up, it’s easy to forget them. But if you need to dip into your emergency fund or use your car repair fund, that money needs to be replaced eventually.
Always know where your funds rank in the hierarchy. Remember, this should be a trickle-down pattern. If a fund becomes empty, fill it and continue down to the next one.
Here’s an example. Let’s say you have an emergency fund, a new car fund and a vacation fund – all of which are fully funded. You then have to fly home for a family funeral, using money from your emergency fund to foot the last-minute plane ticket. You also had a vacation scheduled, so you use that money to pay for the trip.
Once you get back from the trip, you should work on refilling your funds. Since you want to start at the highest priority, you’ll begin with the emergency fund. Once that’s full, you can move on to the vacation fund.
While setting up this method can be time-consuming, it will save you time and financial anxiety in the long run. The more you save, the more funds you’ll fill up and the more motivated you’ll be to plan ahead.