When you hear “nest egg” you probably think of a retirement account, but that’s not all it is. A nest egg is money saved up for any future purpose. There are a lot of ways this can look. Today we’ll talk about how you might set up your nest eggs, and then I’ll tell you what mine look like.

One isn’t enough

People talk about having a nest egg, and that’s fine, but I’ll argue that you should have more than one nest egg.

Let’s say you’re saving for retirement, a house, a trip, and a new car. You have $50,000 saved up so far. How much will you put towards each goal? You’ll probably spend whatever you need to on the trip, since that will come up first. Then you’ll need the car, so that comes next. You’ll throw the rest at your house. Then there’s nothing left for retirement. You didn’t mean to spend it all on other things, but with all of your money sitting in one bucket, it just sort of happened.

Now consider a different setup. You’re saving for those same things and you have 4 separate buckets. Maybe you have separate bank accounts. Maybe have 1 bank account and a tracking spreadsheet at home. Either way, you’re keeping track. You know that you have $20,000 saved for retirement, $25,000 saved for the house, $4500 saved for the car, and $500 saved for the trip. Now you know how much more you need in each bucket, so when you get your year-end bonus or any other money, you can make solid decisions.

To know what you need, you need to know what you have, and that requires separating out the money.

How many is too many?

I’ve been asked how many nest eggs are too many. The answer is simple: however many overwhelms you. If you look at your list of accounts and you feel overwhelm, panic, or dread, then you have too many. If you look at that list and you get happy at the thought of all of those nest eggs with savings in each, then you have the right number. Start small with just 3 (retirement fund, emergency fund, something fun fund) and build up over time. More isn’t necessarily better.

Keep in mind that you can combine things when it makes sense and it makes things easier. If you have two trips coming up next year, but the second one is optional, you might use one nest egg for both. If you’re in a 2-car home and you will need two new cars at once, you could save for both in one nest egg and let the amount you save determine which cars you buy. Play around and find what works for you.

What your nest eggs look like

Everyone’s nest eggs will look a little different, but we can still look at examples to get an understanding of how to get started.

Jot down a quick list of everything you want to save for. These are things you won’t be buying with your next paycheck. Instead, you’ll split part of that paycheck into your nest eggs to save for these things.

Next, take a guess at how much you want to save for each item.

Finally, start saving for each!

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Notice that these nest eggs will all be very different sizes and last different lengths of time. When you empty the car nest egg to buy a car, you’ll want to immediately start saving for you next car down the road, so you will always have that nest egg. But once you pay for your wedding, you can close out that nest egg and use the money for something else.

You will also create new nest eggs over time. You might have kids one day and want to create a college fund nest egg. You might decide you want a boat and create a boat nest egg. The sky’s the limit, or rather, your paycheck’s the limit.

How to split up a paycheck into nest eggs

If you have a salaried income, figure out how much you’ll put into your nest eggs every month. If your salary is variable, your savings will be variable also.

When possible, set up an automatic transfer from your checking account into your nest egg savings and investment accounts. That way you only need to think about how much to save once each year when you adjust the numbers. I suggest adjusting the numbers every time your income changes, like when you get a raise or a new job.

How do you adjust the amounts? Start by writing down the total you’re going to save each month. We’ll use $1000 per month as an example. Now consider your priorities, timelines, and goal amounts. Retirement is probably the biggest goal amount and it’s the farthest away. A trip is smaller, but sooner. Divide how much you need by how much time you’ve got. If you need to save $800 for a trip that’s in 8 months, you need to save $100 per month. Use this calculator to easily see how much you need to save per month per nest egg (for non-house nest eggs, simply leave out the down payment and closing costs):

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Add together your target savings amounts for all of your nest eggs. Is the total under your monthly savings amount (in our example, $1000)? If so, great! You get to decide where you’ll put the extra money. You might choose to start saving for something you’d been holding off on. Or you might choose to save extra towards one or more of your current nest eggs.

If the total is more than your monthly savings, though, you need to reassess. Either one of your nest eggs needs to be put on hold, or you need to save less for one or more of them. That might mean finding a way to lower your trip expenses or putting your trip off another 6 months. It could mean another year of riding the bus before buying a car.

Play around the with the numbers until you find a plan that feels right. See a thorough explanation with examples here.

My nest eggs

Like I said, everyone’s nest eggs look different. Here are mine:

  • Retirement – I need this like everyone else.
  • Emergency fund – This is another nest egg we all need to have.
  • Car – My car is fine at the moment, but one day I’ll need to replace it, so I might as well start saving now.
  • Mattress – This will be an expense in 2017 or 2018. I spend 1/3 of my life sleeping, so I want a quality mattress.
  • Travel – I don’t have any trips coming up right now, but I’m certain there will be some eventually.
  • Health – I have some health problems and insurance doesn’t cover everything, so I have to be sure to always have savings available for that.
  • Moving – First, last, and a deposit can really add up. As a renter, I can never be completely sure when I might move again, so I always have some money sitting in a nest egg for my next move, just in case.

What about your nest eggs?

Now that I’ve shared my nest eggs, it’s your turn. Take a moment to write down 3 nest eggs you don’t have yet but that you’re going to create. Then share 1 in the comments. We might just give each other some good ideas!

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