So, you get your paycheck and after you recover from the shock at how little is left after taxes, you try to divvy it up among all your outstanding bills, intending to put whatever is left over into your savings. Does this sound familiar? Moreover, I bet that there never seems to be anything left over to put into your savings. Am I right?
How can you save money? If you are attempting to save what is “left over” at the end of the month after you pay your bills then you are approaching the saving of money backwards. I have often read that you should pay yourself first. I decided to put this to the test.
One of my recent goals has been to save $400 a month. In order to test this theory of “pay yourself first”, I set $200 to be auto transferred to my savings account at the beginning of every month. The other $200 I entered into quicken so that I would be reminded transfer this amount out of my account at the end of the month, which I would do manually.
The results over these last few months have been consistent. The auto debited beginning of the month $200 has been saved every month without fail. Okay, I know it seemed obvious that would happen since I am transferring the money immediately and at the beginning of the month, but I get paid every two weeks, so my pay checks are spread throughout the month. However, I also entered the second $200 savings to quicken so that it would seem like it was already transferred.
Did I save that other $200 I was going to put away manually? Absolutely not. I never managed to save the total amount in any month. I wish I could tell you exactly why this happens from a psychological standpoint but I cannot. It probably has something to with the fact that I knew I still had the money in my account even if it was subconsciously, because with the money that is auto debited my brain decided that money was no longer available to be spent.
This is why I urge people build up their savings slowly and automatically. It doesn’t matter if you only have $10 to save a month, gradually increase the amount you are saving every few months and make those saving automatic. You will be surprised at how quickly your savings account will grow.