Save early, save often
We all know that saving money is important. It’s necessary for emergencies, for big-ticket items, and to use for investing for our financial future. So why do so few of us do it? For one thing, sometimes it can be easier said than done, especially if you’re living paycheck to paycheck. By definition, you don’t have anything leftover to save in that case.
Or so it seems.
The truth is that most people can find a little room in their budget. It can just be really tough sometimes. When you’re down to a dollar a day in “spending money” each week, you get pretty desperate to buy something enjoyable with it, however small, instead of saving it. My contention is that if you’re that low on funds (and I’ve been there) it’s better to work on increasing income to build savings, instead of trying to cut further. Babysit two hours a week and you suddenly have extra money that you can use for savings, at very little time-and-energy cost.
If you’re not that low on funds, you can find a little room in your budget. Cut out one meal out per month or change your cell phone plan to something less expensive, and save that money instead. The important thing is to begin regularly saving something. Save early, and save often.
For many people the easiest way to save early is to have the money automatically sent to savings using direct deposit. That way it never comes into your checking account at all. The next easiest is to set up an automatic transfer to your savings account. That’s usually a set amount on a set day. I prefer to do my savings manually, but it’s a habit that I do each payday. (I manually transfer money into a variety of savings buckets.) When savings is the FIRST thing you do, it becomes a lot easier. After all, if you wait to save “what’s leftover”, there may not BE anything leftover.
But, if there is something leftover, you can move to the “save often” portion. In addition to saving as soon as I get my paycheck, I transfer money to savings when I get done paying bills and planning for the things I want to buy over the next couple of weeks. And as my next payday approaches, I transfer still more money to savings or investments if there is still some leftover. Then I rinse and repeat. It’s gratifying to watch my savings and investments grow. It gives me the same kind of satisfaction as buying something I’d like to have does. (Of course, it helps that some of my savings is earmarked for vacations, which I love.)
***
This post is part of a series. See what everyone should know about personal finance for links to additional posts on the subject.
***
I think the hardest part of saving for me is knowing when I have money leftover in my bank account–I’d like to put more money in savings without wondering if it’s earmarked for something else. I automatically move money to my savings account on every payday. But unless I track every single expense in every spending category (soooo tedious!), I never know what’s leftover. I think my partner and I will be moving over to a cash-only system to track these things better.
I don’t have automatic transfers set up although I should. I naturally transfer a small percentage of my check into my vacation fund each month. Don’t have enough excess to contribute to savings, but my savings is high right now so I am happy. I have gotten on a good routine but have almost stumbled.
I think you brought up some great points here. On my site, I advocate finding money within your current budget to “pay yourself” If you made coffee at home rather than buying it at the local coffee shop, “pay yourself” that $4 straight in to your savings account.