Budget

You’ve seen the posts on instagram, FB, and countless articles. They usually have titles in the following themes:

• Never buy a new car
• Buying a new car is a total waste of money
• A car immediately loses 30% of it’s value the minute you drive it off the lot

These headlines can make it seem that a person is crazy or downright fiscally irresponsible if they…dare we say it…purchase a new car.

Today we are going to explore this and look at both sides of the issue. 

In full disclosure both of us here at Bridges Twins have purchased both new cars and used cars at different times. 

The examples below will relate to the purchases of Toyota’s. We have always been fans of the value of the car maker, worked as consultants at Toyota and Lexus, and owned stock in the company.

The Case For The New Car

You have decided that you want to go the new car route. For this equation to work you want to select a car that holds its value well. You have scanned for vehicles with a high resale value and have settled on the Toyota Tacoma. This mid-size pickup is the #1 in resale at 5 and 7 years according to caredge.

After 5 years the car has depreciated 29% which is amazing for a vehicle as some vehicles do that in 1 year.

Before we get into the hard and fast financial numbers let’s look at the advantages of a new car:

• You are the only owner of the car
• You get the original manufacturer warranty
• You can find a car with the features you want without comprising, at least too much, because of what resale inventory is available in your area
• Avoid having to worry if everything you are being told about the vehicle is true

The average purchase price for a Tacoma is $37,394 according to car edge. By year 10 it’s worth $17,987 or about $18K.

For our work here we are going to exclude sales tax. If you drove the car to year 10 and then sold it you would have paid $19,394 to drive the car or $161.62 on a monthly basis.

In the above we are excluding maintenance. When buying a new car one of the key considerations is that you drive it for quite a long time. We would encourage you to drive it well after you have paid it off and keep putting that money away toward your next vehicle.

The Case for The Used Car

Our used car purchases in the past have been with dealerships that offered certified pre-owned. For those not familiar with these types of programs in general they include the following:

• A thorough inspection of the vehicle by the mechanics that regularly perform maintenance on that type of vehicle
• They have brought the vehicle up to a standard set by the manufacturer
• It can come with a warranty backed by the original manufacturer of the vehicle
• They tend to have lower mileage compared to those that are not certified pre-owned
• Tend to be cars that are only several years old

All that is well and good however we talk about making smart financial decisions around here so let’s look into the financial details.

According to our friends over at caredge.com a Toyota 4Runner will depreciate 33% after 5 years. This car has an average sale value of nearly $45K.

With the 4Runner after 2 years the vehicle still retains 81% of it’s value on average. For a vehicle at this price point you would save, on average $8K. This is a considerable amount of money. Keep in mind you also save taxes as you will be paying on a smaller purchase price.

If you find a vehicle with low mileage and with a warranty you will be winning.

So Should You Buy a New or Used Car?

What the above shows is that the phrase “never buy a new car” isn’t 100% true. It’s not a hard and fast rule. Why do we say this? Is it because we have purchased new and used cars and somehow want to defend our actions? Absolutely not!

What matters in a big ticket purchase, such as a car, is that you have done your homework. For example if you are buying a new vehicle, such as a BMW 6 series, that depreciates 69% over the first 5 years then maybe you want to consider a used version as you will save substantial money over a new version of the car.

A car purchase should not prevent you from saving for larger goals such as retirement, a home down payment, or larger goals. If the payment will put you in a situation where you will have to cut back dramatically on saving then whether it’s a new or a used car the decision should be carefully evaluated.

Take Action & Take Control Of Your Finances

As with everything we produce here we encourage you to follow three rules:

• Invest Consistently

• Develop Your Squirrel Funds

• Manage your fear and you WILL succeed

This world is a have it now type of world.  Whether it is a 5 minute ab workout or a 7-minute video that promises a drop-shipping business that can make you millions. Each ad is focused on getting you started and the sooner the better. The world rarely wants you to wait…they want you to take action and they want you to take action now!

We are big believers in taking action. Action can help you achieve true financial freedom faster. The daily marketing barrage isn’t pitching financial wellness, it is usually pitching an expense.  Take, for example, a recent ad that came through our feed:

On the surface this seems like a great offer.  A $349 driver for $37.42 for 12 months. It’s being offered to you at 0% APR.  See how the above works at https://club14golf.com/pages/how-it-works.  

For many that would consider themselves budget conscious this is a great alternative. Using a credit card could be extremely expensive. You would be wasting money on rates that can range from 8%-21%+.  

Making the analogy to a credit card purchase would be a pretty fair deal. We want you to look beyond the deal. Our goal is to get you focused on the best possible financial future. In order to do this you can’t look at an offer only in a convenient light.  

Before you dive in on the latest of payment plans (Klarna, Affirm, etc.) we invite you to consider asking yourself the following questions:

• Do I really “need” this item today?
• Is this something I have been wanting for more than 24 hours?
• Have I tried to save for this item in the past and not achieved that goal?
• Is the amount of $X ($37.42 in the above) currently available in my budget?
• Have I set up any auto-recurring investments of at least $X (i.e. $37.42) for the defined payment period?

Your likely initial reaction is “why are the twins being so hard on me?”.  After all these payment solution providers are getting their costs covered by the vendor which gives you the benefit of a 0% APR purchase….so why not do it? 

You might still decide to make the purchase because it’s a cost effective acquisition. The challenge really is to answer each of the above questions.  We want you to answer them truthfully and honestly. Your future self is counting on it.

The products being offered with payments generally aren’t critical needs, they are “nice to have” items such as clothes, sports equipment, etc.  From our POV people take the payments because the overall cost being spread out over payments makes it incredibly affordable.  

The challenge to consider though is “how many payments have I committed to?”   This is perhaps the main reason to avoid taking the free payment option. If you keep adding payments that are debited from your checking account then pretty soon you could be in a position where your payments are $300+. 

Even if they are all at 0% interest does that $X fit into your existing budget? If it does fit into your existing budget what are you doing with those funds now?

With payment solution firms being incorporated into many different online stores we would challenge you to save on your own for an item instead of taking the payment option. Saving up for an item will challenge your mindset to see if you really still want the device 12+ months later and if you don’t then you can put that extra savings into the Stock Market or in your Mutual Fund(s).

Twins Rules for Financial Success

As with all of our content here we want to encourage you to follow three core rules :

• Have an Emergency Fund/Squirrel Funds
• Invest for the Long Term
• Invest Automatically & Consistently

It starts with a free 2 month trial and it ends with “how many services am I signed up for?”.

The chains of habit are too weak to be felt until they are too strong to be broken. By Samuel Johnson

Companies make it easy to sign-up for a service. Many have subscription fees that are so low you barely think about it. They might be marketed as “less than $1 a day” or “Not even 50 cents a day”. 

The service might have a show that everyone at work is talking about or maybe they unlock one feature that you just have to have. Today we explore entertainment services and how they might be impacting your future savings goals.

Before we get too far rest assured we will not make you unsubscribe from all of your services. What we are going to ask you today is to understand how much you are spending on these services. After you know the number then you can determine if your future self will thank you or wish that you had cancelled.

Entertainment Services That Many Have and The Costs…They Really do Add Up

Let’s look at some common services that many have and see what the monthly cost is going to be. For each service we outline the basic entry price to be a part of the platform as well as the upgraded version.

If there were multiple versions, such as with Netflix, we chose the highest price plan available as the upgraded version. For plans like Amazon price we converted the annual payment into a monthly to make the comparison easier.

At first glance all of the numbers are relatively small. In some cases you can’t get a fast food meal for what the monthly subscription fee costs. This is exactly how these companies make their services attractive. 

Today isn’t about reducing costs to a minimum it’s about understanding how much these services cost. In a survey conducted by Statista nearly 70% of Americans don’t have $1,000 in savings. When you don’t have an emergency fund every cost matters and it’s important to look at all expenses.

Before we go too much farther look at the chart and see where you are on the savings chart.

Do you have money saved if you were out of work for 1,3, or 6 months?

Write that number down. Even if that number is zero that’s ok just write it down and let’s take a look at the cost of these services from a different perspective.

Before you consider investing we recommend having money saved for an emergency. In the next section we are going to look at the value of these services should you decide to invest.

Putting Some of Your Entertainment Funds Into Investing

You might be saying to yourself “Nobody has all of those services”. It’s quite easy to see how someone, maybe someone you know, could easily spend $61 a month on streaming services.

As we do around here it’s not about giving up on technology or refusing to ever go out to coffee. It’s about choices and understanding the impact of the choices.

Let’s use the example of two individuals and see how this works itself out. 

Tommy decides that he wants all the services we listed and he wants the premium version of each. He decides that it’s “only $61” so he buys all of them.

Billy decided that, while he likes entertainment, he really likes Disney+ and bought the upgraded version because it had additional content he enjoyed. He also loves his music and so he decided to purchase Spotify premium. He decides he is going to invest the difference.

In the first year, as we can see from the chart above, Tommy ends up with $0 in investment dollars and Billy has $456. Tommy isn’t concerned as he is having a good time watching lots of movies.

Billy decides to put his investing dollars into an S&P Index fund and he has forecasted an 8% annual return (well below the historic 10%) however he knows times are changing. Billy is investing $38 a month and in 36 months has $1,541. He now has savings greater than man in America.

It’s all about choices. Billy gets to enjoy his streaming. He also has additional investments years later. In Billy’s view he has the best of both worlds. He has investment dollars and entertainment dollars.

What Choices Are You Going to Make?

The choices you make with your hard earned dollars can have a lasting impact. We encourage you to look at the services that you subscribe to and if you are getting the true value of these services.

Take Action Today

Today we want you to ask yourself a few questions:

• Are you investing regularly?
• Are the services you subscribe to preventing you from investing?
• Have you thought about what the future version of you would say about the choices you are making today?

We always want to remind you to:

• Invest Consistently
• Develop Your Squirrel Funds
• Manage your fear and you WILL succeed

All too often articles on savings come down to giving something up…but what if we told you that you could keep enjoying what you are doing but if you made a few small adjustments that you could actually enjoy a greater amount of savings?  You might be trying to find $50 in your budget or maybe you would like to find even more.  

Read on to find out a few key ways to save that can help you monthly.

Tip #1: Pick Up Your Own Food…like Pizza

With the world going more and more to convenience and micro transactions in the form of services such as GrubHub, Postmates, etc. it is easy to get lost and think this is just the way it is.  Of course we are never ones to argue that there is a time value of money factor, but have you looked at what your convenience is costing you monthly?

For example in my family Friday night is the night we commonly enjoy ordering food and most often that means it is pizza night.  While we have ordered from local establishments we also order from the national chains (i.e. Domino’s, Pizza Hut, etc.).  Take for example when you order from Dominos in my neighborhood you can expect to pay the following:

• Delivery fee: $4.99 (not a tip)
• Tip: $5-$7 (definitely need to tip the driver)

That means that each week if I ordered pizza for delivery then I would be spending about an additional $10 a week or $40 a month.  You might think “well that isn’t that much” but the reality is that the Dominos is only a few minutes from my house and often I can stop to get the pizza prior to going home.  While the amount is small on a per order basis it can really eat into money that you could use to save additionally or even use for additional opportunities to eat out.

Tip #2: Use Your Credit Card Points System

When you first started on your path to financial freedom it is possible you had credit card debt and now you might even avoid credit cards to avoid going back in debt.  While credit card debt can be crippling, effectively using a credit card can be a way to gain extra dollars for savings each year.

Take for example a simple rewards card from Bank of America.  You can earn points as you spend and with one card program you could earn the following:

• 1,000 points = $10
• 1-1.5 points per dollar of spend

Consider for a moment that you put common expenses such as gas, eating out and groceries on your credit card each month and pay it off (to avoid paying interest charges) and you could easily be spending $1,000 a month.  That means you can get an extra $10 a month or $120 a year back for expenses you are already incurring.

Tip #3: Costco Gas

In the Los Angeles area the line for Costco gas is traditionally long.  I have to admit that this is not a tip either one of us follow; however, because the savings possibility is there we felt it necessary to share.  Costco purchases their gas efficiently and passes those savings on to its members.  Costco gas can be .20 to .25 cheaper per gallon.  Consider the following potential savings:

• (18 gallons * .20) = $3.60
• $3.60 * 4 weeks = $14.40

With an average commute, at least in Southern California, filling up weekly is certainly a reality and if you can get your gas at Costo you can save some money each month.  Even if you aren’t inspired by saving $14+ a month consider that filling up at Costco could pay for one of your monthly subscription services (i.e. Netflix) to allow you to enjoy some guilt free entertainment.

Tip #4: Recycling Can Really Add Up

You might be recycling weekly along with your trash services, but what if we told you that your recycling can provide you additional savings?  Yes it is a bit of a hassle to gather the recycling, but the reality is that you are paying for the recycling rebate when you make the purchase which means the act of recycling is getting a bit of a rebate.

For us we use recycling as a way to help our kids learn a bit about savings by depositing the recycling checks into their savings account(s).  We gather the recycling (generally every 4-6 weeks) and take it to the recycling center.  Our kids get to see that we have gathered it over the given time period and we show them the check from the recycling center.  On a good period of recycling it can be $30 and when you do that over the course of a year that can be $270-$350  If you don’t have kids then you can use it for your own savings program.

Tip #5: Grocery Store Member Program

Since we all need to buy food you might as well save a little while doing it.  Yes we get it that being part of a rewards program means they are tracking your spending behaviors but it can add up to some serious savings on each shopping trip. Take for example a favorite chip of Joe and I (Fritos).  At my local Vons if you are buying a 9.25oz bag of Fritos then you can save $1.49 on the purchase (see below).  While this might sound small saving $1-$2 on any given item can certainly add up on each shopping trip.

There are many ways to save and help you to achieve your best financial future.  Saving often comes down to looking at common expenses and determining if there is a way to accomplish that goal in a manner that has greater financial efficiency.  These ideas are just the start of your path to greater savings; look at your common expenses today and determine if you can get to your goals with a few minor changes.

Whether you get paid weekly, every two weeks, or even monthly, what do you do when your check comes in?  Or dig even deeper, what are you feeling when that check goes into your account?

It is important to have an understanding of how you are feeling when money comes into your account because in general society doesn’t glamourize healthy financial preparedness.  After all, many songs extol the glamor of payday by suggesting one could go to the club, buy countless rounds of drinks or even more dramatic versions are promoted.

Consider the following range of emotions that you could be feeling when you get paid:

• Relief
• Anxious
• Excitement

Of course there certainly could be many more emotions, but even looking at this small list which one would you most want to be in?  Consider a few thoughts on why you might be in each position:

• Relief: You could be feeling relieved because the money came in “just in time” to cover expenses or because your account was dangerously low on funds.  Relief, when it comes to a check deposit, is generally felt because there is a challenge with spending and each new check helps you stay just ahead of that problem.  Consider building up a reserve fund or analyzing your spending for the past two months to see if you could make improvements to avoid getting too low on funds.
• Anxious:  You might be feeling anxious because you are unsure of what to do when your check comes in.  Your account balances could be just fine, you are paying your bills, moving a little to savings, but you have a feeling that you just aren’t doing enough when each check arrives.  The anxiety can lead to doubt which makes you feel uneasy for a few days until you get into your traditional habits but the feeling returns when the next check arrives.  To help alleviate the feeling of anxiety we would encourage you to look at your financial goals and how you can get closer to them with each check.  Goals can range from items such as a nice road bike to larger items such as saving for a down payment on a house or buying a car.  We encourage a mix of smaller and bigger goals so you can feel the progress which helps to alleviate the anxiety.
• Excitement: You might be feeling excited because you are eager to go spending or (if you are a listener or a reader with us) because you have a solid financial plan in place that is helping you to build your best financial future possible.  Now, when we say “financial plan” we aren’t referring simply to retirement…we are referring to your total approach to finances.  We have found that those who are excited when they receive a check are most satisfied because their plan includes an approach to debt reduction, savings for specific goals, savings for retirement, and allocating funds specifically for fun.  The objective of a plan is certainly not just “how much money can I make/have?” it should be for you to enjoy your life with a great financial foundation.

If you are reading this and haven’t even thought about how you feel when your check comes in that is ok too as now this gives you a framework to start evaluating your emotions as money comes into your life.  The more you understand how you feel about money, the greater opportunity you have to put it to work for you to help you achieve your best financial life.

When one hears the word “discipline” it is not usually associated with “fun” or “enjoyment”.  By adding “finance” into the mix then surely that must not be fun.  Of course we all know that mastering financial discipline is a journey and not a destination.  One of the reasons that many people give up on the journey of achieving their utmost financial freedom is because they associate the success with finances as only sacrifice instead of an on-going compromise to maximize the journey.

An aspect of finances that is often a budget killer is that of going out to eat.  Especially as income increases one of the most common ways to enjoy that additional income on a regular basis is going out to eat but that can also be a sure fire way to prevent you from maximizing your best financial goals.  We aren’t going to suggest that you give up going out to eat because we feel that won’t allow you to stick with your overall budget and financial planning.  Consider the following methods to enjoy a night out and still help you to keep on track with your financial goals.

Appetizer Night

This is one that we have each enjoyed with our spouses.  When you go out with the goal of having appetizers you can bring your overall bill down dramatically and even capitalize on happy hour specials.  This method gives you the opportunity to enjoy going out and likely even try a few items on the menu that you might not otherwise (afterall you don’t have to get just a single appetizer). 

Sharing a Meal

Meal portions over the years have grown substantially.  One study on food portions done a number of years ago showed that hamburgers had increased by 23%, Mexican food increased by 27% and those were just a few of the items cited.  With portions having increased take the opportunity to share a meal with your significant other.  

By sharing a meal you get the following benefits:

• Save some calories: Most of us are trying to save calories and splitting a main course gives an opportunity for calorie savings.  Of course in any given relationship it can be tough to agree on one meal so you might need to offer up that one person gets to pick one time and the other person gets to pick the next time.
• Save on expense: This is certainly the biggest financial aspect as instead of 2 meals at $16-$20 a piece you only are purchasing one and that adds up if you go out to eat 3-4 times a month.

Coupons…Yes Coupons

For many, using a coupon isn’t difficult. We aren’t sure why but as we have discussed finances with people we have found that, in particular as income increases, there is a lack of desire for coupons. The reality is that company’s wouldn’t create coupons if they didn’t want you to use them.

Now you likely won’t get a coupon to your fine dining locations such as Ruth’s Chris; however, you will find that coupons are readily available to great locations such as Buffalo Wild Wings, Rubios, TGI Friday’s and much more. Whether you save the coupons that often get mailed to your house or you hunt on the internet, taking a little bit of time to find coupons can have you enjoying a great night out for much less than you’d expect.

To keep moving forward on your financial goals we encourage you to keep up habits such as going out…we think making a small adjustment in how you do that though will have you reaching your goals and still enjoying the process.

When Joe and I ran our real estate practice my role was to focus on buyers.  As part of helping buyers I made everyone (yes everyone) go through a buyer interview process.  Now if everyone did a “financial interview process” at age 18 and revisited every few years we are confident that more people would reach the financial future they truly desire.  Why is that relevant to finance?  Well there is one question that I asked each buyer as we went through the interview that generally would cause them to take a moment of pause.  The question quite simply goes like this:

Is that a nice to have or a have to have?

I repeated this question after nearly any item related to the property.  For example consider the following dialog:

Me: Would you like inside laundry?

Client: Yes

Me: Would you say that is a nice to have or a have to have?

Client: hmmm, ok well it doesn’t have to be in the house, it could be in the garage.

Me: Ok

Or

Me: Would you like 2 parking spaces? (dealing with condos)

Client: Yes

Me: Would you say that is a nice to have or a have to have?

Client: Well I only have 1 car, so I guess it’s a nice to have feature.

Me: Ok then

As you are developing the best path to your financial future inevitably you are going to need to make decisions on what is nice to have (for today) and what is a have to have.  While this may sound obvious to some, far too often budgets go long periods without being evaluated and the list of “nice to haves” has grown much larger than originally anticipated.  By now you know we aren’t going to recommend “cut everything but the essentials” because we know that fundamentally won’t work for the majority and is more akin to a crash diet vs. a healthy eating lifestyle.  

So what are a few examples of nice to have vs. have to have?  Here are a few examples to consider from our world that might align to you as well.

Strava Premium Membership: $60/yr

Have to Have…for Us

Each year we have a goal of a minimum of 3,000 miles logged between cycling, running, and swimming.  The premium membership of Strava costs us $60 a year and we find it helps to look at the data to evaluate our performance and health.

This certainly falls into the “nice to have” column and while Joe and I aren’t huge believers in monthly subscriptions we like the aspect that it is a one-time annual fee it is one we have actively used for 8+ years at this point.

Starbucks Coffee: $708/yr?

Nice to Have

This is not yet another “oh my you are going to tell me to cut my latte” post.  No, no, we understand that getting a treat from Starbucks can help keep that mental energy up and keep you working on your goals.  What we are going to challenge you is with the following question:

How much of Starbucks is a Nice to Have vs. Have to Have?

For Joe and I we drink black coffee.  Yes black coffee, no cream, no sugar, just black coffee.  And while our coffee is pretty much the cheapest on the menu at <$3 per cup we still don’t go to Starbucks that often.  For us we decided that while we “have to have” coffee daily we are ok making it ourselves.  This means that we traded by getting ground coffee or our favorite Keurig cups at Costco for as little as .56 per cup (a big savings compared with a $2.95 venti black coffee).

Think about this for a moment.  If we have 20 cups of coffee a month (easily 1 per morning) that means the following:

• Make at home: $11.20
• Buy at Starbucks: $59

This delta is $47.80 a month which is only $2.20 off of the minimum amount you would need to put a monthly contribution in at Vanguard.  We can’t see giving up coffee entirely but we did see going to Starbucks as something that was nice to have vs. have to have.

In the analysis of “nice to have” vs. “have to have” there aren’t any wrong answers…unless everything is a “have to have” which means you probably need to revisit your times.  Our challenge to you is to look at your monthly spend and evaluate what you absolutely need to keep, what you can eliminate, and what you might be able to eliminate.

Our bet is you have never heard the term squirrel account. A buddy of ours once commented that we seemed to have funds for different reasons. He dubbed them “squirrel accounts” and it is a term that we have used ever since.

Now before you think we have gone off the reservation let’s outline a few challenges that have happened to us in the past and situations that have happened to those we know.

• You had an unexpected car repair bill for $323
• The garbage disposal at the house went out and you need $175 for a new one plus maybe a few extra bucks to have someone install it
• Your pet needs to go to the vet and your pet insurance will not cover 100%
• It’s now winter and you realize that the coat from last year has holes in it and is beyond repair

We think you get where we are going here. In life there are unexpected expenses that come up. This can greatly impact your monthly spending. You might have to decide if you are going to eat Ramen for 3 months or put the unexpected expense on a credit card.

We invite you to the magic of squirrel funds! These precious little funds provide you with funds when you need them while you store money (nuts) away in them on a regular basis.

If this sounds somewhat familiar we covered “how to hide money from yourself” in a different post. Today we are going to take it to the extreme and outline in even greater detail how to make this system work for you.

Why Should I Have Squirrel Piles Can’t I Just Have One Backup Fund for All Expenses

This is a common question we get when someone finds out about our squirrel pile methodology. Squirrel piles help with more than just unplanned expenses. They empower you to have money when you need it for items that you might not think about on a daily basis.

When you have all of your money in one account you might not be saving enough for say car repairs or you might not realize you have money set aside for clothes as it’s blended together with your pet emergency fund.

This methodology is designed to provide you freedom to spend money not to leave you a prisoner of a bucket of money in reserve that you can’t touch as you fear you won’t have enough to help with expenses should you or a loved one lose a job.

Decide How Many Squirrel Funds You are Going to Have

Now that we have you on board with the squirrel pile methodology let’s start breaking it down.

Step one in the new world of setting up your squirrel piles is to decide how many you are going to have. Let’s look at squirrel funds that we have either had ourselves or that we have encouraged others to adopt.

• Bike
• Clothes
• Car Repair
• Car Mods
• Fun Money
• Out of Work or Reduced Hours
• Gift Fund
• Medical Bills
• Appliance Repair or New Appliance
• Backyard Furniture
• Golf Clubs
• Pet Care
• Car Insurance

Looking at this list you might be thinking “wow these two have totally lost it” or “this sounds insane”. We understand this might not be for everyone however what this method provides is having funds when you need them for expenses that you might not have planned for in advance. It’s especially helpful for unexpected expenses that happen on an infrequent basis.

Before going to the next step look at the list above one more time and select 2 or 3 that you might have encountered in the last 12 months where you had to either dig into an emergency fund or put onto a credit card.

Allocating Funds To Your Squirrel Accounts…You Are Now Like a Squirrel Always Preparing For Winter

Part of the magic of the squirrel accounts is that you are perpetually putting nuts away for winter. This might seem crazy however if you can stay with us for just a little bit longer we promise this will make sense.

Let’s look at how you might allocate funds to these accounts.

Another beauty of the squirrel account allocation system is it’s made up of smaller amounts of money on a monthly basis. Each contribution is about the same amount as one would spend on eating lunch for two or a week’s worth of Starbucks (we promise we love Starbucks and we don’t pick on them).

Over time these smaller amounts of money really add up. In the chart above you can see that after two years you start to amass larger amounts of funds that can really help you tackle larger purchases with much greater ease.

There are online banks that allow you to accomplish this kind of saving set-up quite easily. One of the banks that we have used to do this is SoFi where they have a feature called “Vaults” and you can set-up all sorts of squirrel accounts. Who knows maybe one day a bank will set up a feature called “squirrel accounts”