Saving 10% of your money is like "paying an extra bill".
Yesssir, you got that straight. I can't remember for the life of me where i stumbled upon this link, but it's from 2006 and talks about this "extreme saver" who does just that - thinks of saving as just "another bill" to pay. Genius!While i've never really thought of it like that, it's pretty much what i've been doing each check.
I have all these categories to xfer the money to every 2 weeks, and "savings" is one of them! Literally speaking, we put $100 into our House Savings account each month (it used to be $200, but we had to cut back since the Mrs. is now in grad school).
In general, however, i pump in much more than 10% into savings - mainly my 401k. i'm seriously in love w/ those things, just so damn easy to inject money! I throw 19% of my total paycheck in it every 2 weeks - Scary, huh? The amounts used to shock me, but it's been a good 2 years so i'm thankfully used to it by now. It sucks not having that extra few hundreds each check, but i know it'll be well worth it down the road!
The point is that it's all budgeted into "bills" really. The mortgage, the credit card, the utilities, the savings, the 401k, etc.
I really like this "way" of thinking, so it's totally going into my back pocket for the next time someone asks for advice ;) A nice and simple concept to get your mind right. You gotta like that.
Labels: budgets, money management, saving
posted by J. Money at
7:32 AM
21 Comments:
I agree! I often wondered (when looking over my projected budget numbers for moving out into my own place) why it seemed that I could afford so much less than everyone else I knew. Its because I was thinking of my savings as a non-negotiable part of my budget!
I don't even think of my 401(k) as "my" money...it goes away and I'm not going to see it for another 40(?) years. Its just the way things are. I think if I was to change that mindset it'd be more difficult for me to go through with it and I'd be tempted to cut down on contributions. (I hope that makes as much sense to you as it does to me, lol)
I agree! Although it's easiest if I don't see it. :D So I have a direct transfer set up every payday to divert money directly to savings... that way, I don't have to miss it or reconsider. :)
My savings is part of the expense section of my budget as well.
I have a lot of debt (from when I did not know any better) which I am paying down now so I am not saving the 10%. I am saving 2% so I can make aggressive payments on debts...but I have treated the savings like a bill as well and it is all automatically done from my ING account. Love this post.
I do that too. Each month I have a list of regular bills and 'savings' is one of them. Once that's done it's like the money has been spent, so I put it out of my mind and don't borrow from it.
I agree ... pay yourself first, and all that ... but there are some legit differences between making "savings" a bill and the other bills on your typical list:
a) your savings won't charge you interest if you pay late or less than the full amount
b) paying off your others bills ahead of your savings won't trash your credit rating
c) the collections department of your savings account won't hound you ... eg. you won't be calling yourself several times a day threatening to sue if you don't pay yourself your money
d) your lights/water/heat won't be cut off if you stash $x per month in your savings account
e) you don't get cool offers stuffed in the envelope of your savings bill
f) f. hee. "f."
I like this idea but... bills kind of depress me, savings makes me happy! Every time I see my savings accounts go up or money going into them it gives me a lift - seeing my money going to my water bill just doesn't have the same effect.
Ditto what Dawn wrote. Seeing a negative balance get smaller never made me anywhere near as happy as a positive balance getting bigger!
Agreed. This is how I think as well.
It's funny that you should post about this!
This is normally how I treat my savings--as just another bill.
I know you read my blog occasionally and I'm sure you've seen me bitching about how I never have any money and I don't know where it goes...
I actually DO have money, but in savings! Because I pay myself like a bill, it feels like one, too! *poof* my money is gone!
I only ever think about my savings when I really, really need them. It sucks to have to dip into them when I've spent so much time feeling like I sacrificed something. hehe.
@ginger - that's funny that YOU just commmented on here! guess where i was at that exact same time? on YOUR blog ;) haha...great minds i say.
All you "bill" lovers - good for you! i haven't heard of many people thinking of it this way, so you guys are on top of it :) gotta love that.
For all the "bill" haters - i can see that a bit too, that word naturally conjures up negative feelings. i get that way w/ my 401k sometimes, like it feels that i'm "wasting" it on a bill, but it's really a positive thing...but overall i'm a fan of the "bill" concept for sure.
@ bigasssuperstar - You make a good point there sir. May i offer you a complimentary beer?
Thanks. I have never looked at it like this. Although we do put money in savings and college funds each month there are times when we decide to go on vacation or something else with it.
If I treated it like a bill I wouldn't be so tempted. Even better if I have it on automatic transfer.
Oh, I like this idea! Can't wait to implement it sometime down the road :)
i do the same thing...we used to budget a $500 transfer into savings each month (when i had a WAY better job), but now that i'm only making a FRACTION of my old salary, we only throw $200 at it each month. but really, it's better than nothing! plus we put $50 every month into an auto maintenance savings fund and another $197 into car insurance savings (for when we pay our premium in full every 6 months). it's built in...to me, i don't even try to find ways around it :)
When calculating the percentage of your savings, do you do it pre-tax or after-tax? Pretax i'm putting away 20-25%, while after tax im stashing away 26-30%. I work for a public university so I invest in a 403b & the rest into my HSBC savings account. IF i included the pension plan I receive as an employee I'm really "saving" 30% pretax and about 38% after tax.
Despite this, my retirement accounts are almost bare after so much market turmoil. I'm 24 yrs old by the way.
I agree that this is a great way of looking at it -- its amazing how helpful this advice can be to people, i think.
@ Amber C - Most definitely. I'd totally automate it if possible myself, but our paycheck situation is a bit odd. But still, it sure is hard not touching it once it's put away! That probably comes with time and habit ;)
@ ka1t_lyn - One day soon :) I'm glad you liked it.
@ Tiffanie @ welikemoney.com - Holy crap, you guys are ON TOP OF IT! $200 a month is wayyyy more than a lot of people i know. Plus, you're taking on another $250ish, so you're socking away almost $500 a month!! incredible :)
@ Denis - That's a good question, i think people do it both ways, all depending on what's comfortable to them. The 19% i put in is pre-tax, but then anything else is after tax...i should calculate the exact % i save actually w/ everything combined. Your % looks tight man, good work! And you're starting out young which is even better!
@ Student Scrooge - Totally, it's all in the way people think about things ;)
Very smart! If saving was just budgeted in like any other bill, maybe more people could increaes their savings.
Working in banking, you would not believe how many people don't have savings accounts or think they don't need one. How stupid! I don't care how strapped for cash you are. Everyone needs to start a small savings account... whether it's $20 a month or $200 or 10% of your income, everyone MUST save. It boggles my mind that 75% of clients I see have no real savings. It's disturbing.
Man, i bet! seriously, i'm really going to have to work for a bank one of these days - it would be like a playground over there ;)
I know - way late, but since your 12/9/09 post led me here... =o)
I like that idea. I actually have my E-Fund in my Debt Snowball. I put a tiny bit in there now, but once it is up to the plate ALL the money is supposed to go there. It helps me remember that it is not all said and done when the debts are paid off.
You are correct :) Getting out of debt is a HUGE step, but once you've mastered that it's on to accumulating wealth so you have financial freedom down the road. Doesn't mean you have to become a millionaire (although that would help!), but just that you don't have to stress or worry about money anymore - that's the ultimate game plan.
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