This is a guest post from Dee at SmallHouseLife.com.
We all know we’re supposed to pay ourselves first when saving money. That’s what everybody tells us to put aside whatever money we have allocated for savings, and then disburse the rest according to our budget.
Sounds simple, right? Maybe some of you are pretty good at it, but personally I have a tendency not to follow through when I have a pile of bills staring me in the face.
I will share with you one simple saving tip that not only forced hubby and I to save big time, but eventually made it possible for us to quit our day jobs and go into business for ourselves.
If you’re employed (or your spouse is), ask the employer to take money directly out of your paycheck and deposit it into a company savings account. If you’re self-employed, stick with me because there is a plan for you.
You might wonder what’s the difference between this tip and simply paying yourself first? There is a huge difference between having to take action to create the savings.. as opposed to setting up an automated system that does the saving for you. With this method you actually have to take action not to save.
Prior to setting up our savings in this manner, my husband and I never could seem to save a substantial amount of money. Just a few years after putting this plan into place, we’d saved enough to quit our jobs and move to the Texas Hill Country to live our dream.
What if the employer won’t do this, or you’re self employed?
Saving Money Like a Ninja with an employer:
You have a couple of options. The best one is to see if they will automatically deposit your paycheck into your bank. Depending on your bank, it can be received as a split tender where the predetermined savings goes into one account and the remainder into another one.
If your bank doesn’t offer that service, then set it up where once the paycheck hits your bank account, the savings is automatically transferred to your savings account. Every bank I know will do this, so if yours doesn’t, you might want to consider a new one.
What if (by slim chance) your employer won’t do an auto deposit? This is a bit trickier, because now you have to deposit the check yourself. The most important part is for you not to have to take a step to put the funds into the savings. Because that’s where it gets too tempting to save a little less ‘just this month.’ So if you have to deposit the check yourself, have it set up with your bank that once the check hits your account, the savings are automatically moved into a separate savings account.
Saving Money Like a Ninja for the self employed:
Depending on your source of income, you’ll either have to deposit the check yourself for the bank to divide. Or, if you work online, every income source I’m aware of will automatically deposit your checks for you. Once the check(s) are deposited, the system you’ve set up with your bank will automatically separate your savings from your household income.
Now here’s the really fun part. Once you’ve had this system in place for awhile and you’re feeling pretty good about yourself then increase the savings amount.
When hubby and I implemented this plan, I worked at Neimans (on commission) and my husband waited tables. We had a modest starter home and one child.. soon to be two. Needless to say, we did not have much extra cash to set aside for savings. And yet, we had a big dream to leave Houston and our jobs… to forge a simpler life so we could be with our kids more and homeschool them.
We started out just saving a little. I honestly don’t remember how much, but what I do remember is that every time we were comfortable with the remaining income, we would increase our savings. Maybe $25.. another time $100..just depending on how brave we felt. Towards the end, we were receiving just $400. per month from my check and we lived on that plus my husbands tips. All the rest went into savings!
We absolutely could not have done it without the savings going directly into an account we didn’t ‘see.’ I encourage you to try it. Even for ninety days. My guess is that you will be very pleasantly surprised.
Bonus Tip: I firmly believe that we need to be clear on our ‘why.’ What is the point of the savings anyway? Is it to finally have some financial security? Buy a home? Pay cash for a car? The clearer our ‘why’ is, the easier it is to stay the course.