Give Your Money An Identity

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When I talk to people about saving money, the conversation always goes one of two ways.

  1. The person is not saving money at all and gives me a list of reasons why they can’t save any money.
  2. The person is saving some money from every paycheck, using the “pay yourself first” method (which is awesome, by the way), but when I ask what they are saving for, they give me a blank stare and say “savings”.

Though I commend the person for saving money instead of blowing it all, I do think that having arbitrary savings is a complete waste of money.

Money Without a Name is Worthless

Let’s say you have saved up $5,000 in your savings account, and it’s sitting there, rocking a sweet 0.04% interest rate. You have diligently saved for the last 10 months and have built a nice savings account for………..for……….something…?

You might say that it’s “in case of emergencies” but find yourself pulling out some cash to buy clothes or for that weekend getaway to Lake Tahoe.

Those aren’t emergencies, so your account is not a true emergency fund.

You just have a weird looking pile of cash that has an identity crisis. You poke a prod and pull cash out of the pile when “necessary”, but that pile can’t ever tell you “hey, that’s not what I was made for, you’re using me wrong.”

Ok, that was a really bad analogy, but I think you get where I’m going with this.

If you have an arbitrary pile of money saved up without a name, then you will not use it properly. Money is a tool to be used for many things in your daily life.

Money is not there to make you happy, but to enable purchasing products/services that are necessary or fun. When money comes into your possession, the worst thing you can do is to not give it a name.

Your money WILL BE USED FOR SOMETHING someday, so it is advantageous to assign it to a task as soon as you get it, lest you spend it all on coffee and pop tarts.

How To Give Your Money An Identity

So, we have established that a pile of unnamed cash is a bad thing. So how do you go about giving it a name?

Well, first you need to start by creating a budget. Once you have established how much you need to pay for your necessities, you then can start planning for upcoming expenses by setting up your savings buckets.

After that, if you have any extra cash in your budget, you then can start giving that money a name.

Depending on you current financial situation, your extra cash will have different names.

If you don’t have any savings, I recommend your extra cash go toward building an emergency fund of one month of expenses.

If you are in debt, I recommend to put all of your extra cash toward paying off that consumer debt. Start by paying off your smallest debt first and then the next smallest and so on until your debt free (also known as the debt snowball).

Once you’re debt free, you have a few options: you can build a larger emergency fund (especially recommended for homeowners and those with only one income), or you can start investing toward retirement.

Heck, you can even do both at the same time! Maybe you want to pay off your mortgage in the next 7 years? I don’t have a hard and fast rule for what to do with your extra cash after becoming debt free, but definitely give your money a name and put it to work!

Comments: Do you have a lonely, confused pile of cash with no name? What do you do with your savings? If you haven’t given your money a name, why not? Why do I always get dizzy and nauseous when writing these articles on the bus? WHEN ARE THEY GOING TO FIX THOSE POTHOLES?!

Jacob Wade

Jacob Wade

Jacob Wade has been a nationally-recognized personal finance expert for the past decade. He has written professionally for The Balance, The Spruce, LendingTree, Investing Answers, and other widely-followed sites. 
He’s also been a featured expert on CBS News, MSN Money, Forbes, Nasdaq, Yahoo! Finance, Go Banking Rates, and AOL Finance.

In 2018, Jacob quit his job and his family decided to sell everything (including their home) to take off on an adventure. They traveled the country in an RV for nearly 3 years, visiting over 38 states, 20+ national parks and eventually settling in the sunshine state!

22 thoughts on “Give Your Money An Identity”

  1. I definitely had this problem a couple years back. I had a nice pile of cash in the bank. While I was somewhat hoping to use it towards a mortgage downpayment, I couldn’t bring myself to commit to it. So it just sat there tempting me. Suddenly I was on a vacation with my girlfriend and more than willing to pay more than my share since I had this big pile of cash. In hindsight, I should’ve shown better willpower and actually had a plan for that money.

    • That’s exactly how it happens! I blew through over $100k by the time I was 21 because I never gave my money a name. UGH! Can you imagine what I’d be worth right now (age 26) if I have told that money “go sit in a ROTH IRA”?

      BTW, did you ever end up purchasing a home?

    • Haha, yes, my wife is very wise! SmartyPig looks like a cool app to use. I use excel to assign my money via savings buckets and have different savings accounts with names for the big things (debt payoff, EF, etc.). I agree that without a name you don’t seem to go anywhere with your finances, but your money is going everywhere!

  2. I use excel to name my funds. I have categories with how much money is in the fund, what my goal is and what I still need to obtain that goal (you’d think it would be easy math but I like to be lazy. Well that and I’m horrible with math) and this way I know that the fund over there is for Christmas, that fund over there is for the wedding, and so on and so on. I find it a lot easier to save money when I know it is for something and not just a rainy day. The emergency fund I’ve had to dfine to myself as well in order so that I don’t get itchy money hands.

    • That’s how I do it. All my savings buckets are tracked in excel. I really think I would have saved thousands if I had given my pile o’ cash a name back in the day. Plus, what fun is it to save for the sake of saving? Saving with an end goal in mind is much more motivating!

  3. I think giving your money an identity is ingenious. For many goal-oriented people, they’ll see it as something to work toward. (If they give the pile of cash a realistic identity of course). Moreover, having a goal gives people focus and once they associate it with achieving something they can touch or experience, it becomes a lot easier for them to want to do it. We need more suggestions like this when it comes to personal finance – making things easy and within reach for the average person.

    • Thanks Jenn. I think that people tend to live in ignorance of where their money is actually going and don’t tend to plan ahead with their finances. I like to take the ambiguity out of managing your finances and setting goals is the easiest way to do this. And I agree, when you have a clear goal in mind, you can focus and be motivated to achieve that goal, as opposed to just saving money for the heck of it! Thanks for dropping by.

  4. Great strategy! You’re definitely right that giving that faceless pile of cash a name will add new purpose to it. I like to think of my 401k as my “retire by 55 fund” and my Roth IRA as my “retire by 50 fund”.

    • I like that. Even your retirement accounts should have names and goals attached to them so you knwo what you’re going for. Just a heads up, you do need to be 59 1/2 to withdraw from your 401k and IRA penalty-free 🙂

  5. i like this idea, and have about 6 savings accounts currently setup with ing. yes, one is an emergency fund that is only to be touched for things like car repairs, or health care costs.. but we have another for vacations, and another for a bathroom remodel we are hoping to tackle next year.

    • ING is great for naming your savings accounts! You can have as many as you want and give them all unique names. I have one account for now, but when I start earning more and have extra cash, I will definitely open a car replacement fund, vacation fund, etc…

  6. I think that’s so true. You have to assign meaning to your savings which gives it purpose. I also like to think of budgeting and frugality as a kind of game, like monopoly so it makes it fun.

    • Once I got on a budget, it definitely became like a monopoly game. People look at me weird when I tell tham that I love paying bills and budgeting every month. When you get control of your finances, the burden is gone and it actually becomes enjoyable. It’s so hard to convince people of this, but those that do budget completely understand this!

  7. This is some great advice. It’s very hard to look at a pile of cash and think to yourself “this pile is going to be great in 30 years when I retire…”. I never requested a debit card or checks for the account that I deposit my monthly savings into. Because of that, it’s a pain to take it out. So, I guess I can call it my “too much work to w/d” account.


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