We all know that we ought to be
paying ourselves first — by building a healthy emergency fund, investing
in our retirement accounts, and saving for important future purchases.
But for many of us, it can feel like
paying ourselves first will end up shortchanging our other financial
obligations. How can you pay yourself first when you barely have enough
money to make it to the end of each month?
But saving is just like Lao Tzu’s journey of a thousand miles. They both start with a single (and, in this case, easy) step.
Here are five ways you can painlessly start paying yourself first:
• Automatically transfer 1 percent
The best way to save money is to keep it
out of your hot little hands in the first place. You can do that by
automatically transferring funds to your savings or retirement account
every time you get paid. That way, you never have the temptation to
spend it.
Start by setting up an automatic
transfer of 1 percent of each paycheck. While it may seem as though 1
percent is hardly enough to be worth it, it’s still more than you’d be
saving otherwise. Once you get used to having your take-home pay reduced
by such a small amount, you can easily increase your savings by another
1 percent — or more. Losing 1 percent is painless, and it will add up
over time.
• Save your change
This one’s an oldie but a goodie. Keep a
jar in your house for pocket change, and deposit all the coins into
your savings account once the jar is full.
You won’t feel any difference in your
finances, and you’ll be adding money to your savings. You’ll get an
extra boost if you label the jar with your savings goal, making your
coin jar feel that much more important.
• Reduce your ATM fees
If you regularly hit up the ATM for
cash, you certainly know that ATM fees can add up. An easy way to save
money is to halve the number of times you go to the ATM. For instance,
if you’re in the habit of withdrawing cash twice a week, switch to a
once-a-week, double-size withdrawal instead, saving yourself the second
ATM fee. While you’re at the ATM making your withdrawal, take a moment
to transfer the amount of the (second) ATM fee into your savings
account. Voila! You’ve spent the same amount of money you usually do,
but you’re paying yourself instead of the bank.
• Keep paying paid-off loans
Sending off the last payment on a loan is certainly a reason for celebration. But it’s no reason to stop making the “payment.”
Instead, since you’re already used to
living without the amount of the payment, just redirect it toward your
savings or retirement account. Then you’ll get the benefit of an extra
savings cushion without feeling deprived.
•Deposit your windfalls
Suddenly coming into unexpected money —
whether it’s a large tax return you weren’t anticipating, or finding a
twenty-dollar-bill in an old coat pocket — is one of the nicest feelings
in the world. Rather than simply spending your windfall, put it into
your savings account. It’s money you weren’t counting on or expecting,
so you won’t miss it.
(One caveat, however: I personally think
it’s a good idea to take a small portion of a windfall to treat
yourself, before putting the rest of it away. That way, you don’t feel
deprived of that wonderful sensation of finding “free” money.)
The bottom line
No matter how tight the budget, there’s
always a way to pay yourself first. It’s just a matter of finding a
little money here and there that you won’t miss.
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