Creating a Savings Fund: Explained By Way of Blue Light Layaway

Okay, the concept isn’t difficult, right – we save money for larger ticket items. The explanation and how to create a savings fund is soon to follow, hang tight. First a story.

Blue Light Layaway: Savings Fund

Did your Mom ever shop at K-Mart when you were growing up?  I don’t think K-Marts even exist – and I don’t know that it was a nationwide thing either…but we had one in our closest neighboring city.  Which was about an hour away, so really not that close at all.  If you haven’t been here long I grew up on a farm outside of a really small town – going to K-mart was an event.

Okay, back to the big K.  It was a cross between a Wal-Mart and a Fred Meyer I suppose.  No groceries, but lots of home goods, clothing, electronics, bedding, etc. and then randomly a little eatery too. They had this strange (or maybe brilliant) sales strategy where they’d take this bright blue flashing light into a particular department and then have a special sale right on the spot for a short period of time – the blue light specials.  Whenever we were in that store and we heard over the loud speaker that there was a blue light special in the XYZ department we’d have to go check it out.  I learned sales shopping from my Mom, clearly.

One hot Summer day when we were promised a special Icee treat if my sisters and I could remain well behaved, they had this magical sale right up in the girls clothing department.  Score!  My Mom was tossing items into her cart that were a little bit bigger than my size…and told me they were for my older cousin Jennifer for Christmas.  What the heck!? I was totally miffed. I did my best to keep it together as the red, raspberry Icee was still calling my name.

Next up, we drug our cart full of goodies to the Layaway department. I think these things still exist in some stores. This is where you ‘lay away’ your items to pick up at another time.  You get to keep the sales price, and then pick up your items when you pay them off by a determined date.  My Mom put a small deposit down and among other items, laid that sweet red, pink, and orange shorts set down….for Jennifer. 

My Mom would always edit her items when it was pick up time.  Nope, I don’t like that one after all – and let’s add this one to the purchase kind of thing.  It took FOREVER to get through the K-Mart trip on a payday.

Guess who found her Mother in the middle of a little white lie that next Christmas morning?  Jennifer didn’t get that sweet shorts set – I did, and I couldn’t wait another 6 months to wear them.  It was a staple in my wardrobe that Summer.

Layaway is a lot like a savings fund.  You figured that out already, didn’t you?  Savings funds are intentional plans to purchase items – but having the money to do so before you use the said items.

What could you use a savings fund for?

Savings Fund Suggestions:

  1. Vacations! If travel and R&R is important to you, I suggest you get yourself a vacation fund.  It doesn’t have to be international travel worthy either – it can be as simple as beach weekends once a quarter or staycations in the Summer.
  2. Holiday Expenses – Christmas comes around once a year.  There are gifts for your favorite people, bottles of wine for the host, decor to replace your broken lights, and extra stamps if you’re still sending out holiday cards.  This savings fund never goes away, it gets depleted and then filled back up again.
  3. Maintenance Funds – Much less fun than the two above; this is to help repair the things that break.  If you drive a car, you need this.  If you own a home, you really need this.  Consider the age of your car/home and then plan accordingly for your maintenance fund.  Not sure where to start?  Just start.  $25/month for a car and $75/month for your home are good jumping off points.
  4. Car Purchase – We paid cash for our last car, and I don’t think we’ll ever go back to a monthly car payment.  So, the next vehicle we purchase will be by way of savings fund.  We’ll be putting aside money each month as a car payment, and then use that cash as buying power for negotiation and getting a great deal.
  5. House Down Payment – My goal for you is to put 20% down on a home so that you can avoid extra fees, and you have fast equity in your purchase.  You can get by with as little as 3.5% for some programs….but you must not forget about the fees that can easily be 1.5% on top of your down payment. Minimum, you need to walk in with 5% of the purchase price ready to write that check.  This is a savings fund paired with a Redfin app and dreams with your partner about garages, bedrooms and school districts.
  6. Tech Update – Modern conveniences are expensive! And they break faster than one would expect for the price we pay.  Take a look at your tech and see what you need to save for in the next year.
  7. Health Savings Account – If you have a lot of health expenses, savings for your co-pays, deductibles and out of pocket expenses is important.  You can utilize a true health savings account that has tax benefits associated with it, or you can create one of your own. 
  8. Home Remodel – Big project in your future? Save up for it!  Not only will you be increasing the value of your home, but paying for it as you go is going to feel awesome – and you’ll be incredibly mindful of your purchases when you fork over your hard earned, saved cash.
  9. Engagement Ring – Getting ready to get hitched? Save up for that bling.  Figure out how much you want to spend (remember that she doesn’t love you less based on how much you buy…or she’s the wrong girl) and your timeline and then get to your secret saving.
  10. Annual Expenses – This is another much less sexy savings fund, but worth it.  What do you pay for annually or intermittently?  Car insurance?  Property taxes? Annual memberships?  Add that money up, divide by 12 and contribute to those intermittent expenses monthly. 

How Do You Go About Setting Up a Savings Fund?

This is what I recommend.

Determine which savings funds you’re starting.  You may need to do a little prioritization.  What do you want to tackle this year. Baby steps – I know you want to do all the things, but that isn’t always in the cards.  Focus.  What’s most important.

Now, how much do you want in that savings fund when it’s done?  Think big, and all inclusive – and I’m not just talking about vacations here. What is the real total that you’ll need.  Do a little research.  Consider any fees, and any other expenses you may need after your purchase that are associated with the item.

Outside of yesterday…when do you want to purchase this item?  Holidays typically always have a November due date to be ready for December. But all of the other items are really up to you – when do you want to remodel the laundry room? Hint, hint for my husband.

Now, you have a simple math equation. 

Total Amount Wanted/Number of Months = Monthly Savings Fund Amount

Go open a free savings account with your bank, label it something fun that reminds you of your goal and set up your monthly automatic contribution amount.

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Ready For a Few Examples of Savings Funds?

Car Purchase: Let’s say that I have my eye on a Subaru Forester Sport (because I do) and I’d like to spend no more than $25k.  You get some wiggle room with price here because you can always buy different models, different cars, etc. to meet up with the amount of money you have.

If I’d like to buy this car within 18 months.  $25,000/18 = $1,389 per month would go into my Forester Fund….and I’d probably call it that in that new savings account I set up (for free with my bank) because that’s just more fun to look at, and motivating to me to keep my automatic transfer headed in that direction.

Laptop Upgrade: You have a MacBook Pro on your upgrade list too!? Looks like we’ll be shelling out $1,199 for that laptop magic…and my husband will have won the battle of a complete Apple household. Let’s say that I want to get this little computer on my lap by December, which is 8 months away. $1,200/8 = $150 per month will be set aside in my business account for a shiny new Apple.

Vacation: Yes! My favorite! I love traveling and getting away from the usual to explore new places, enjoy downtime and skip laundry. My sister and brother in law want to join us in Mexico, exploring a new little island called HolBox after their baby #3 is born.  This trip is planned for November 2022, and the hubby is telling me that it will likely be a $4k trip for the two of us.  $4,000/18 = $222 per month sliding over into the Vacation fund.

Paying for these items in advance means you pay attention to what you pay for.   You’re intentional. You have to really want it…in order to not divert that money away for something else.  It’s planned. It’s patient.  It’s smart!

Ever have a wee bit of regret for said upgrade, vacation, etc. that you put on a credit card and then paid for over, and over, and over again each month – even to the point that you’re like…what did I buy, anyway? Am I still paying for that?

I want you guilt free, all in on the intentionality, and enjoying the heck out of your purchases – not wincing when you pay the bill.

Get yourself a savings fund or two…or three.  Prioritize what you want and go get it.

I hear that blue light special coming on over the loudspeaker.  Gotta run.

Thank you for joining me on my my journey to influence.

Sarah is a Ramsey Preferred Coach
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