Should Paychecks go to Savings?
If you’re like most, you might find it difficult to transfer money to your savings account each month. After the bills have been paid and you run through a few discretionary dollars, you’re just waiting on that next check to roll around. Yes, I totally understand.
But, with all the money wasted on overdraft and bank fees annually in this country (approximately $38 billion per year), there has got to be some place you can find that additional money!
Well, a while back, a reader and friend of the blog, Lauren, asked me whether or not she should put money in her savings account first and then transfer what she needs bi-weekly to pay bills.
I don’t do this personally, but I think it is an awesome idea for those of you who also struggle in this area. It is literally “Paying Yourself First” for a chance.
But, before you run out and start changing direct deposit forms, here’s a system I want you to consider if you want to try this out:
- Create a bi-payment schedule. Make three columns. In the first column, list each monthly bill. In column two, list the due date for the corresponding bill. Lastly, write the amount of the bill in the final column.
- Rearrange each line item and place in order by due date.
- Group everything by weeks based upon the calendar.
- Determine what your net income is each pay period versus the expenses you have during that pay period.
For example, you make $500 during week one and your expenses (fixed and variable) equal $360 or hopefully some number UNDER $500!
Side Note: If your expenses are greater than the amount you are bringing in, consider calling creditors to rearrange due dates. . . YES, they do that!
- Give yourself a buffer. If cash is limited, use a minimum of $50 or whatever works best for your budget. You still have to plan ahead for the unexpected!
- Transfer the money you need in your checking account for that week. Expenses + Buffer = Transfer amount
- Repeat for the remaining weeks in the month.
- Automate the process ONLY after you’ve mastered it for a few weeks.
Start a week before hand to make sure you don’t run into any issues. Before you know it, you could have a substantial amount of savings in a relatively short period of time. Even if you’re left with $20 per pay period in savings, it’s still possibly more than you would have had doing what you’ve always done.
Remember, finances are not a one size fits all adventure. Different things work for different people, but the point is to find something that works for you and stick with it!
PS – Check out the video response I sent Lauren: