This is step 3 in our 7-part Bipolar Finance series.
The first two steps of this Bipolar Finance has been looking back and getting to know how your Bipolar affects you. Step 3 puts in to place the most important mechanism that will lessen the financial impact of mania – a financial buffer account.
Squirrels put away months’ worth of food during time of plenty. They hide it away for when food is short, so that the stored away food can see them through the lean times. In a similar way, consider putting some money away during your quieter times, so that when you do go on a spending spree you spend this money rather than the rent money.
In personal finance, a popular and effective method in building up savings is to ‘pay yourself first’. Before you pay your rent, bills and food, you slice a chunk out of your pay and put it in a savings account. You give your future self ‘pay’ before anything else. You could be saving for a holiday, a deposit for a house or a retirement. Here, you take a slice out of your pay cheque, and put it in a savings account that is specifically for dealing with the spending sprees.
How much should I put away?
A good method in figuring out how much you should put away is by finding out how much you tend to spend on each manic spending spree. This is where your spending pattern chart you made in step 2 comes in handy.
Have a look at all the large spikes in spending, and average out how much each of them cost you on top of what you normally spend. Now average out the amount you spend on a non-manic month. The amount you should aim to have saved up for each spending spree is the difference between these two numbers.
Amount to save = average manic month spend – average normal month spend
So if you tend to spend £3000 on a spree, and only £1500 in a normal month, the amount you ideally want saved up is £1500.
You should now work out how much you need to put away each month. To do this, go back to your spending pattern chart you made in step 2, and count the months between the large spending spikes. Although the length of time between large spikes will vary, take a reasonable average. The amount you should save each month is the amount to save you calculated above, by the number of months between spending sprees.
Amount to save each month = Amount to save / number of months between sprees
So if you have 20 months between major spending sprees, the amount you need to save every month to cover the spree cost is 1500/20 = £75. If your amount to save each month seems impossibly high, don’t worry. Be realistic about your budget and decide on the figure that works for you. Even if it is just £10 a month, that’s £10 less that you will have to put on your credit card on your next spree.
Where should I put the money?
It’s best to open up a savings account that is specifically for the purpose of building up a buffer to handle the manic spending sprees. I don’t recommend mixing these savings with other savings you might be building up (such as buying a car, etc.) because it then makes it too easy for you to spend all of what’s in that account when you are manic. You want to be able to see clearly how much you have left of your Bipolar savings instantly.
I have my Bipolar savings account with the same bank that I hold my main current (checking) account with. This is so that it’s easy to transfer money between the two accounts. Ensure that it is an instant access account so that you can dip in to it when you go manic, rather than dip into another savings account that is easier to access.
When should I save?
Every month. Set up a standing order/automatic transfer from your current account to your Bipolar savings account. Set this up so that the transfer happens on the day you get paid (thus paying yourself first) for the amount that you calculated in this step.
It’s going to be difficult to cut a good chunk of money of your wage every month for any savings, and particularly more so when it’s for spending when you are manic. However, the Bipolar savings account is your insurance policy. You have a choice as to whether the next manic episode will take you further in to debt or not. Take a moment to consider whether letting go of one of your ‘luxuries’ is worth the peace of mind knowing that you won’t get into debt next time you have a manic episode.
- Calculate how much you should save each month
- Set up an instant savings account with your bank
- Set up a automatic transfer to your Bipolar savings account on the day you get paid
Bipolar Finance series:
Intro: Introducing the Bipolar Finance series
Step 1: Get motivated!
Step 2: Know your spending pattern
Extra: How to draw your mood history chart
Step 3: Become a squirrel
Step 4: Lock away your savings
Step 5: Go cash only
Step 6: Serve eviction notice on your cards
Step 7: Spending the Bipolar savings without guit
I am not a financial advisor nor a medical doctor (as I always say, I’m a doctor of computers). The steps in this series are things that have personally worked for me. What I would really like for you to do is read about each step, and see if they may help you in controlling your spending. However, if you don’t think it’ll help you, please do not carry the steps out.