Savings Story

I Only Focus On One Account At A Time

I have big plans for 2007. I am trying to save 60% of our gross income. While our pretax retirement contributions are made on a monthly basis (by our employers), I like to focus on our other investment (or savings) accounts, one at a time. I think of it like a debt snowball in reverse. Confused? Here’s a breakdown of our year, based on when I’ll be focusing on a particular account:

Jan: Daughter’s ESA For 2006
Feb: Daughter’s ESA For 2007
Mar: My Roth IRA For 2006
Apr: My Wife’s Roth IRA for 2006
May: Repay My ING Account
Jun: Repay My ING Account
July: My Wife’s Roth IRA for 2007
Aug: My Wife’s Roth IRA for 2007
Sep: My Roth IRA for 2007
Oct: My Roth IRA for 2007
Nov: My Son’s ESA for 2007 / Brokerage Account
Dec: Brokerage Account

Each month, instead of putting small amounts into each account, I focus on one, lump sum deposit into a specific account. I have prioritized my schedule based on the accounts that I “must” fund to the accounts that I’d “like” to fund. So, in 2007, I’ll definitely fund our Roth IRA’s, probably fund our Son’s ESA, and hopefully fund our Brokerage Account. Once an account is “fully funded”, I use the funds in that account to purchase shares in an index-based ETF.

Instead of putting “a little here and a little there”, I choose to focus, each month, on a specific investment (or savings) account. I am motivated by the idea of completing a task, putting that task “behind me”, and moving on to the next task. For instance, my Daughter’s ESA is fully-funded for 2006 and 2007. I will not have to “think” about here ESA until January or February of 2007. So, I can put it “out of my mind” and focus on another account.

If I get ahead of (or behind) schedule, I’ll simply adjust my dates, but not the ORDER in which accounts are to be funded. (While waiting for the lump sum to “build up”, I simply keep the money “sitting” in my ING DIRECT(affiliate) account, accruing interest.)

6 thoughts on “I Only Focus On One Account At A Time

  1. For your investment accounts (like Roth IRAs), when their turn comes up do you dump it all in the market at once, or do you put the money in the account, invest the majority in a money market fund, and dollar cost average into the market?

  2. This is the way we fund our accounts as well, and it does make things a lot easier. If you like checking things off of a ‘to-do’ list, this is the way to go!

    That is a good comment about dollar cost averaging, and to be truthful I hadn’t given thought to how it would logistically work. We just invest in lump sums. I will be interested to read the author’s response to that question.

  3. I fund our Roths every week. I have Vanguard accounts set up to withdraw the money electronically from our checking account. I like this because of the dollar cost average method of into the market. If there is a drawback – it is that you have to keep up with the checking account. I do like your idea of focus!

  4. I save all of the money in my ING Direct account, then deposit it into my investment account, and make a single, annual ETF purchase. (So, I am not dollar-cost-averaging over the year or over months… but I am dollar-cost-averaging over years…) I plan to leave my investments “unchanged” for a minimum of 5 years…

  5. I like the idea of focusing on one goal at a time, but probably would make more regular deposits.

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