It used to be impossible for me to save money. Really impossible. I’d spend and spend, and run out of money before running out of month.
I’d try, kind of, to save more money, but it was simply too hard.
But then, one day, I read a blog post that made me change my mind. It was the beginning of 2013, and the writer gave us five ideas on how to make it a great year. He said to write down our goals, and direct deposit into savings.
I could feel myself resisting. I direct deposit into checking, and whatever’s leftover at the end of the month goes into savings.
My method was clearly not working. According to that article, the reason I wasn’t saving any money was that it was an end-of-the-month decision, and it should have been a beginning of the month decision.
Keep your checking account relatively empty, says the logic. Direct deposit into savings, and whenever you need to make a transfer, transfer money into checking and pay things from your checking account.
It’s a simple change, but it’s powerful. You’re saying “I’m going to save as much of this paycheck as possible, and pay my bills with whatever’s left,” instead of the other way around. You’re consciously deciding to save money, instead of unconsciously spending it.
Think about it this way: what if we lived in a world without direct deposit? Or even a world without banks? You’d get paid, in cash, for the work you’ve done. What would you do? Keep your entire paycheck in your wallet while you’re out and about in the world? No, of course not.
That’s the way to keep your wallet empty.
So if it makes sense with physical money, the same logic should apply to our virtual currency of direct deposit and automatic withdrawals.
You should try it!
Contact your financial institution and let them know that instead of depositing all your money into your checking account, you’d like to do half in checking and half in savings. Then, if you end up needing to transfer, you can.
It worked for me. Really well. In fact, I split my paychecks between financial institutions which made my savings that much harder to access. They were connected through a shared branching network, but if I needed money, I had to physically go into the credit union and ask them to transfer money between accounts.
Then, I never felt like I had “enough money to spend” in my checking account, because in reality, I didn’t. So I spent less.
Image by cohdra