setting aside savings

[LivingAlmostLarge]

Someone asked me what tricks do you do to set aside savings? I suggested opening a separate account and redirecting the money there. But it doesn't seem to work and a friend started working and instead of "saving" her paycheck they spent most of it. They made about $30k more and it's gone. Part of it is that they were overspending before so they always accumulated CC debt and then worked to pay it down here and there.

I'm wondering what other tricks are there? The account she opened for her earnings was at the same bank. Different bank? How do you prevent just transferring the money and using it? Cash? I was thinking maybe pulling cash out, but then saving all of it and having boat loads of cash seems nuts

[james.hendrickson]

Put the savings in a bank account you don't have electronic access to. This walls it off and makes it harder to get your money. Like, you'd actually have to get in the car, or walk to the bank to get the money.

[scfr]

What worked for me when I was starting my financial responsibility journey was to put money somewhat off-limits by locking it away in CDs. (Yes, CDs can be broken, but for me there was a psychological barrier in the form of penalties that worked.) I then became motivated by seeing the earnings.

[disneysteve]

I think it's important to automate the process. Have the money taken out monthly without you doing a thing. And it helps to put it somewhere a little harder to touch like an online or brokerage account, not somewhere you can go swipe your ATM card and pull out cash.

[crazyliblady]

Someone asked me what tricks do you do to set aside savings? I suggested opening a separate account and redirecting the money there. But it doesn't seem to work and a friend started working and instead of "saving" her paycheck they spent most of it. They made about $30k more and it's gone. Part of it is that they were overspending before so they always accumulated CC debt and then worked to pay it down here and there.

I'm wondering what other tricks are there? The account she opened for her earnings was at the same bank. Different bank? How do you prevent just transferring the money and using it? Cash? I was thinking maybe pulling cash out, but then saving all of it and having boat loads of cash seems nuts

Tell your friend that it takes a lot of discipline to take control of your money. Make a budget and stick to it. Make a shopping list when you go to the store and stick to it. Turn off email notifications about sales, etc. if it is too tempting and remove your default cc number from online shopping accounts, as that makes it too easy to spend. This will help to quell the "i wannas."

I have accounts at different institutions, and always credit unions. I am done dealing with big banks. My experience with them is that I am an account number and nothing more. I have 2 emergency savings, 9 sinking funds (directed towards specific purposes), and a high interest earning savings. I use direct deposit for some of it, but for the sinking funds, I deposit money every payday like it is a bill that must be paid.

[myrdale]

The first of every month my paycheck hits my money market account. I like maintaining $20k between checking and money market. Any amount over this $20k limit, and I write a check to deposit in another money market account at the local credit union. Some months when I've not had many expenses its a $3k check, other months it's $1k or not at all. January through March it's usually none at all since I send everything extra to the Roth IRA. I don't have a check book for that account, so when I am ready for a big purchase (the truck or roof so far), I have to go to the credit union and have them print checks.

[kork13]

I agree with Steve -- the best thing that's helped us has been automation. Every week, money gets pulled automatically into our savings & investments. Because I never have to think about sending money to savings, it's just there when I need it.

Another little thing that helps to boost our savings a bit is a program with Ally (though I think a few banks offer it) --they call it "surprise savings", basically watches your checking account balance, and it occasionally pulls $10-$30 into savings. Does this every few days, and over time it collects a sizeable amount of cash in savings.

Of course, all of this relies upon you living within your means, and leaving the savings account alone. Keeping the account in a totally separate bank can help, but as stated, it does ultimately depend upon having some personal discipline.

[Like2Plan]

Maybe it is too easy to spend the money that has been saved?

Investing in Savings Bonds might help since you can’t cash them in for a year. This might help to change the mindset.

[disneysteve]

Maybe it is too easy to spend the money that has been saved?

Investing in Savings Bonds might help since you can’t cash them in for a year. This might help to change the mindset.

There are also CDs that let you add money along the way but still have early withdrawal penalties if you cash out.

[james.hendrickson]

I miss the old paper savings bonds - it was super nice to buy them and then get the bond in the mail a few days later. They really were beautiful - nicely printed, well designed.

[QuarterMillionMan]

James, I didn't like those paper savings bonds. Once I ordered $10,000 and never got it so contacted the Treasury Dept. They said they sent it. When I questioned where they sent it, they had my unit number off by one digit so instead of #15 it went to #5. I knocked on the door of #5 and a woman holding a baby answered the door. I asked if she mistakenly received it. Of course she said no but probably had it. She couldn't redeem it anyway with my name on it but shows her character not being truthful and returning it to its rightful owner. Long story short, I had to request that the Treasury cancel that bond and reissue a new one. It was an ordeal to get it corrected but I did get issued a new bond.

[james.hendrickson]

James, I didn't like those paper savings bonds. Once I ordered $10,000 and never got it so contacted the Treasury Dept. They said they sent it. When I questioned where they sent it, they had my unit number off by one digit so instead of #15 it went to #5. I knocked on the door of #5 and a woman holding a baby answered the door. I asked if she mistakenly received it. Of course she said no but probably had it. She couldn't redeem it anyway with my name on it but shows her character not being truthful and returning it to its rightful owner. Long story short, I had to request that the Treasury cancel that bond and reissue a new one. It was an ordeal to get it corrected but I did get issued a new bond.

Oh man QMM, that sounds like a major pain. That happened to me once also, but it was only for like a $35 dollar bond and I was able to get it back.

[ua_guy]

Automation is good, but what about routine. Once per month, sit down, tally the account balances, subtract the bills and expenses, and move money into savings. Set a goal. Maybe you won't hit it every month because of variable or unexpected expenses, but try. If reaching the goal is hard, see where expenses can be trimmed to meet the goal next month.

Most importantly, I think you have to want to save. Not just the idea that you should save, could save, or have saved, but want to save, every month. Or maybe even every paycheck.

[jenn_jenn]

Another vote for automate it.

As your salary increases, just automatically have your pay raises (or at least a large portion of it) go to savings.

Save at least 60% of any bonuses. If you budget off your base pay, this is such an easy way to save money.

Set savings goals. You’re more likely to achieve something if you have a clear goal you’re working towards and this can really help with the mindset that you’re “giving up” things by reducing spending. There’s so much to gain and achieve by saving.

[james.hendrickson]

Another vote for automate it.

As your salary increases, just automatically have your pay raises (or at least a large portion of it) go to savings.

Save at least 60% of any bonuses. If you budget off your base pay, this is such an easy way to save money.

Set savings goals. You’re more likely to achieve something if you have a clear goal you’re working towards and this can really help with the mindset that you’re “giving up” things by reducing spending. There’s so much to gain and achieve by saving.

Giving this two thumbs up.