Money Saving Hacks That Work
“Hello, my name is Todd Christensen, and, although this is a bit embarrassing, I must admit that I am a…, well, the truth is, I, uh. Hmpf, Okay, so I will just say it. I am a savings raider. Whenever I see a balance building in my savings account, I am sorely tempted (and sometimes more than just tempted) to either go out and buy something fun with that money, use it for a trip, or just transfer it back to my checking account to cover regular bills and impulse purchases.
Yup, ‘Savings raider.’ That’s me.
“Whew! It feels good to get that off my chest… again.”
Over the years, teaching personal finance and developing curricula on topics ranging from budgeting to rebuilding credit, from paying down debts to building savings, I have learned a thing or two (or five in the case of today’s topic) about tricking myself into developing better financial behaviors. Knowing what I should be doing with my money is one thing. Actually doing it? That is something altogether different while being simultaneously more difficult and more beneficial.
Thus, when I write about savings hacks, I really am referring to simple ways to trick myself by making it more difficult for me to access my savings for trivial expenses or unplanned purchases. These tricks can truly turn your own good intentions (which pave the road to bankruptcy) into good, long-term financial behaviors.
Let’s get started, in my suggested chronological order:
1. Make it INCONVENIENT
Set up your savings accounts in a financial institution that is separate from your checking account or where your debit card account is held. Do not skip this step. The ease with which we can move money back and forth between our checking and savings accounts with a simple swipe or tap on our phone screen means that we are virtually guaranteed to play the transfer game every month.
If you are a savings raider, you know what the transfer game is. You transfer money from your checking account to your savings account and promptly pat yourself on the back. “Hey, good job for saving money.” Then, five or ten days later, after you have rushed through all of your checking account money, remembering in the back of your mind the whole time that you have a spending cushion in your savings fund, you transfer the money back from your savings to your checking. This is not saving. This is simply deferred spending.
Instead, open a savings account at a separate bank or credit union, and do NOT connect them electronically. You want to do everything you can to make it inconvenient to access your savings fund. You might even consider using an online savings account, since, in a true emergency, you can generally still access your money within 2 to 5 days. Personally, I found a credit union that only has one branch in the valley. I will never request an ATM or debit card connected to that account. It does not have a drive-through lane nor is it open after 5:00 pm or on weekends. If I want my money from that savings account, I have to drive there during normal business hours, which means it is too inconvenient for me to raid my savings account.
2. Make it SPECIFIC
Set up a separate savings account for each of your major savings goals. Contrary to common perceptions, it is possible to have more than one savings account, even at the same institution. “But why would you want more than one?” you ask.
Consider this scenario: you have set savings goals that include paying for Christmas gifts in cash and going on a summer vacation. You started saving aggressively in January, so by May, you have several hundred dollars in savings. Summer is approaching, and so you ask yourself the question, “How much of the savings fund is for summer vacation and how much is for buying Christmas presents?” The answer is simple. Human nature says we want the biggest summer vacation now, so we justify taking all of it for a weeklong trip to the coast, soothing our inner money nerd by saying, “we’ll get caught up on Christmas savings later.” Yeah, right!
If you have opened separate savings accounts for each of your goals, you will know exactly how much money you have available to you, allowing you to stay on task and limit your overspending on the here and now. Your goals might include saving for gift giving, a vacation, your next car, medical or transportation emergencies, your next phone or computer, and back-to-school clothing. Only your priorities and imagination will limit your savings goals.
3. Make it AUTOMATIC
Set up a direct deposit contribution from your paycheck to go into your savings account(s). Most American households already have their paychecks delivered directly to their checking accounts, so why not have your savings fund automatically deposited as well. Not all employers can, but most will allow their employees to set up two or even three direct deposits per paycheck. In combination with trick #1, this will prevent your savings fund from ever being in jeopardy of becoming too accessible for spending on impulse.
If your company only permits one direct deposit per paycheck, have no fear. Most banks and credit unions allow you to set up automatic transfers and payments inside and outside their institution. To transfer to a separate institution, you will need the other bank’s or credit union’s routing number and your account number. Then, set up the transfer to happen automatically a day or two after your planned payday.
4. Make it PERSONAL
Give a name to each of your savings accounts by editing the account details online. Most banks and credit unions will allow you to give your accounts a nickname online or on your phone. So, instead of contributing money to your “Summer Vacation” account (a little vague), you will be depositing money to your account named, “Oregon Beach House Vacation,” or to “Mickey and Minnie’s Magic Vacation with Abigail.” You will consequently be much less likely to raid your savings. If you can give a descriptive name that evokes a powerful emotional response, that account will become much more secure from your potential invasions.
Similarly, do not name an account, “Next vehicle” account. Give it the name of the type of car you really want, whether it is a “2018 238-mile electric range Chevy Bolt” or a “1966 Oldsmobile Toronado muscle project.” Find a name that stirs your soul for each account. You might even name your emergency account something like, “Less stress” or “Better sleep.”
5. Make yourself ACCOUNTABLE
Finally, make sure you share your savings goals with a trusted friend. There are plenty of Facebook posts and entire blogs devoted to the writer’s efforts to reach a savings or other financial goal. That may work for those who are outgoing on social media, but most of us need to put a human face to our friends. Choosing the right friend is critical, though. Consider which of your friends is most likely to hold you to your commitment. “Firm” and “supportive” are the two most important adjectives for the friend you want in this role. Once you choose this friend, share with him or her your savings goals (purposes, amounts, and timelines) and ask them to follow up with you regularly and to ask you about your progress… just do not hide from your friend if you get off track. Stay in contact and stay friends.
There you have them: the five hacks you can put into place this week that will significantly increase your chances of success in saving money rather than just spending it. If you have not noticed by now, with not a single hack involving a dollar sign, successful savings is much more of an attitude and a commitment than an amount… although 10% to 15% is a great goal to shoot for too. But we’ll save that discussion for another day.
Happy money hacking!
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