Lately, at least since 2008, I have watched as the economy has gone south. During this time an old-fashioned term came back into fashion again – “savings”. Or, as the previous generations used to say – saving for a rainy day, or paying yourself first. Everybody seems to suddenly remember this idea. But it has occurred to many that the method of actually saving without causing hardship has been neglected to a point of near abandonment. So how does a person manage to save up an emergency fund without causing hardship on the budget? Here’s a few ideas taken from personal experience.
Set Up an Account at a Bank That’s Not Nearby
I don’t mean opening an account someplace an hour away, but rather find a bank that is out of your daily loop or in an area you don’t normally travel. I live in an area where everything I need is a five minute drive south of me. I opened up an account at a bank on the other side of a town seven miles away. This requires me to travel about fifteen minutes and about seven miles out of the routes I usually take. That makes it harder to just drive out and grab money.
Which brings up the next point to savings – don’t make it easy to gain access to the money.
Don’t Get a Debt Card or ATM Card
Make it so you have to physically walk into the bank and write out a withdraw slip. This step alone causes many people to avoid removing money from savings. If you have an ATM card you will encounter reduced earnings, bank fees for minimum requirements and transactions, and fees from ATM machines not owned by your bank. So, avoid the charges and trouble by not accepting the plastic that is offered with the account.
How Do I Get Money Into My Account Then?
Three methods make this possible. The first method is the one I use currently – electronic banking. Set up the account to transfer money into savings. You can do this via pass-through services such as PayPal or initiate it directly from your bank depending on availability and limitations.
Bank to bank transfers are the next method and are usually carried out via wire transfer; there are usually fees associated with this type of transfer.
A method used by people without Internet access is to simply write out a check along with a deposit slip and send it to the bank. This is the old-fashioned method used before everything went wireless. Write the check when you write out the other bills, making sure this is the first check written.
Each of these methods require a few days for the money to be posted to the account. Banks will advise you of this but it isn’t important because you’re not removing the money immediately anyhow.
Setting a Goal
I know the phrase has been churned out before, but if the goal is greater than the immediate need, common sense overrides the immediate gratification. A simple goal that takes only a year to reach has a better chance of being met than something requiring years to build to. A newer vehicle or a computer are a couple of examples. I am currently trying to save up for a down payment for some land to put a small house on.
But how do I determine what amount to save? Use the 3:3:4 budget ratio I wrote about in Effective Ways to Manage Money. You can save money in the bank, have money to spend and have money to invest in the future. Remember to use only what you have freely available so you can save without creating hardship.
Keep Track of Your Savings
Have paper statements mailed to you. These become incentives because they are proof that you are closing in on your goal. These statements can also be viewed as a good piece of mail in a sea of junk and bills arriving each month. If you bank online; have the bank homepage bookmarked so you can check in on the account occasionally.
Savings accounts used to be a common financial tool in the day when people weren’t so busy with life to think about life. If you start thinking about what it takes to reach goals, and the financial steps to get there, you begin to think about your life. And knowing what your life is about is always a good thing.
Comments on this entry are closed.