Treating Your Savings Like A Monthly Bill Comments59 Comments

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As I dug myself out from under a heap of credit card debt, I realized that I was forgetting one major aspect of financial freedom. My savings account was being neglected. My main focus was to pay down the credit cards, one by one, and then focus on building my savings to a respectable level. We all know how important it is to have a fully funded emergency savings account, but I wasn’t following my own advice. Once I paid off my last credit card, I looked for answers to build up the account that I had torn down.

I have always had a savings account at a large bank along with my checking accounts. As the interest rates fell through the floor and I was earning a meaningless 0.10%, I decided to put my money into a credit union. I opened up two new accounts, a checking and savings, and started funding them with any extra funds.

Every time I received my paycheck, I would handle my regular bills and miscellaneous expenses. After that, and only after that, I would fund my savings account. Each month was different, where some months I would add more than others. There was no consistency, no will power. I needed to find a better way. Then I decided to treat my savings account a little differently.

Changing the way I think about saving

People tend to worry about their expenses, and then figure out if they can “afford” to fund their savings account. I was doing the exact same thing. I have always had my monthly bills written on a whiteboard in my office, so I can keep track of new or recurring bills. This has been my method for years. One day, I was adding another bill to the board and it hit me. I needed to start treating my savings account like another monthly bill.

Time to add another bill

We all hate paying bills, but we continue to do so. We have signed contracts with providers that require us to pay them for a service. I realized that I needed to come up with a contract for myself. Why not fund my savings account in the exact same way that I would pay a monthly bill? All I needed to do was figure out how much I could afford each month without the miscellaneous expenses and then transfer the money into the account. Here comes the internet to the rescue.

Thank you technology

With the expanse of online banking, it made this process even easier for me. With my monthly “fund” figure, I decided to automatically transfer payments twice a month, as dictated by my pay schedule. This would put money into my account without me even lifting a finger and then “hiding” that money, so I didn’t have the desire to spend it.

Ever since I started treating my savings account like a monthly bill, I have surpassed my emergency fund goal and am working on hitting my “6 months of expenses” goal. The best part is, if I ever need the money, I have easy access to it. By switching my mindset, I have taken something that involves some emotion and made it mathematical. If I don’t have to see it, then I won’t have the ability to waste the money on unnecessary purchases. I know exactly how much my savings will have in it in 3 months, 6 months, and beyond. I have taken back control of my savings account.

How do you save money? Have you thought about treating your savings account like a monthly bill?

Author Bio: Grayson is the owner of Debt Roundup, a personal finance blog dedicated to helping everyone get out of debt. Grayson dug himself out of $50,000 worth of credit card debt and has started to gain positive net worth. Check him out at Debt Roundup.

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This entry was posted in Financial Advice, and tagged , Comments59 Comments
By : Adam | 14 Jan 2013
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59 thoughts on “Treating Your Savings Like A Monthly Bill

  1. Chris @ Stumble Forward

    Great article Grayson. I guess I’ve never really thought of it like that though. One thing I do is save everything above a certain dollar amount on my weekly check. In my case anything above $500 goes towards bills but if I earned $600 that week a $100 will go towards my saving thus paying myself first.

  2. John S @ Frugal Rules

    Awesome post Grayson! I could not agree more. We started doing this years ago and haven’t looked back. We view is as paying ourselves first and the beauty of doing it electronically each month is that we don’t even “feel” it.

    1. Grayson @ Debt RoundUp

      So true John. While I am not technically “paying myself first”, I am making it automatic and painless. Some take money right out of their paycheck when they get it, but I just have it drafted at a certain time per month. It is still technically paying myself, but maybe not first!

  3. Eric J. Nisall - DollarVersity

    If you “pay yourself first” it makes perfect sense to think of yourself as a bill. Great to see that you were able to get into a routine where you have some continuity Grayson.

    What I try to tell people is to check with their company (if they are employed) to see how many direct deposits they can have. This way, not only can the net check be deposited electronically, but payments to a savings and retirement account can be automated as well. And we all know that it can be easier that way for some people since they won’t see those funds going into their account, and therefore won’t “miss it” .

    1. Grayson @ Debt RoundUp

      Great point Eric. I did look for that route, but since I already had money going to my personal checking account, my joint checking account, and my 401k, I was out of direct deposit accounts. If you have the option, I would take that as well!

  4. Jerry

    It’s true that paying yourself first leads to making the most progress on your savings. It’s also insurance for those unexpected things that come up.

  5. Sean @ One Smart Dollar

    I have always used this approach. From the time that I graduated college and started my IRA I have always automatically paid into it twice per month. I think of it as a bill that needs to be paid so I just make it automatic.

  6. CultOfMoney

    I think this is a great plan, and I do it myself. Each month I transfer x dollars into my savings, which then gets pushed out to the broker every couple of months. I don’t fund savings explicitly anymore, but making sure to pay yourself first (whether investing, emergency fund, etc.) certainly helps make sure that you’re not shorting the future you.

  7. Edward Antrobus

    My banks require automatic transfers of at least $25 into the savings accounts to keep them free. I’m not too the point yet where I can actually keep that money there, but I treat it like a bill on my budget.

  8. TB at BlueCollarWorkman

    That is a GREAT IDEA! Just pretend like your savings accoutn is another bill, another greedy company. BUt the great part about it is that over time, you’ll remember that it’s NOT another greedy company, it’s your own money gtting built up for you! Awesome post, dude.

  9. Jason @ WorkSaveLive

    I love the idea of treating your savings account like a monthly bill, but personally for me I don’t need that kind of psychological approach. Unless a disaster happens, we’ll always have money left at the end of each month because of the way we budget, and that simply gets put towards our financial goal at that time (savings, debt, etc.).

    For most though, I think it’s pretty brilliant if they can really trick themselves into thinking it’s a bill.

  10. Suzanne

    If only we all learned this one principle early in our working careers, we would have better habits and much more in savings. I have an automatic debit going to my savings once per month for an amount that is not huge, but that is motivating as I see it pile up.

  11. Grayson @ Debt RoundUp

    That is good to be able to have that much left over. I am a planner and though I have a budget, I never know what will happen each month. I can’t plan for life’s little twists in the road. That is why I treat my savings like a monthly bill.

  12. Pauline

    Great way to put it! Even after I decided to put most of my money into investments, the regular savings account transfer kept kicking and I really don’t notice it. It is nice to see what adds up there after a few months.

  13. Tanya

    What a great way to look at it. Saving money is just as important as paying your bills so why not look at it the same way. I am going to have my husband read this too sense he is the one who pays bills in our home. I bet he will enjoy this as well. Thanks for the great advice.

  14. Money Bulldog

    I have a friend who’s always telling me he has no money, when I know full well he has thousands in savings. It’s not that he’s trying to deceive, it’s just that as you say he treats his savings account as a bill, untouchable and non-negotiable. Every month he adds more to it and he’s unwilling to touch it unless it’s an emergency or an investment. Great post!

  15. Ornella @ Moneylicious

    Treating your savings account as a monthly bill is something I’ve been teaching to others. It’s not another way to pay yourself first. I’ve included this in my speaking engagement. Make your saving contributions part of your “fixed expenses.”

  16. Darnell Jackson

    Good post. Buying silver and gold coins are a good way to “cash out” of the market and save without as much risk as paper. Plus you can be confident you’ll get a respectable return since savings accounts pay diddly.

  17. Patti

    Setting up the savings deposit to be transferred automatically on a regular basis is great way to build a savings account. Eventually you don’t even miss the money and you become so conditioned to saving that you don’t even consider the money available to spend. It just keeps on accumulating.

  18. Matt

    Ahh! Pay yourself first! Now it makes a bit more sense to me. I’ve always found it hard to save for exactly the same reasons, thanks for the tip, think I’m going to use this.
    I might take on Darnell’s idea as well…

  19. Jamie Dickinson @ YourSavingAngels

    Totally the best way to look at savings. Especially, if you’ve been paying credit card bills anyway. It’s money that you’ve been getting by without anyway, so why not bung it in a savings account. I made the mistake a few years ago when I stopped paying off a debt and instead of saving he money I started spending it. Once you get used to that extra cash it’s really hard to go back again.

  20. CreditDonkey

    Absolutely great! I was already doing (the transfer to my savings account), but it lacked the consistency and regularity. I just transfer what funds are available for savings and never on a regular date. I will now define a specific amount and treat this as a regular monthly bill. Thank you for this post.

  21. Holly@ClubThrifty

    Treatingour savings like a monthly bill is the exact strategy that we employ. We just pay it (transfer money) like we pay every other bill that we have. It definitely works…expecially over a long amount of time. Before we started doing this, we would just spend our extra money!

  22. Lakita

    We really have to treat our personal savings like our monthly bill. This is an eye opener. It is not sufficient to pay credit card bills or we end up empty handed. Let us allot some amount for our savings account even if it is not so large.

    1. Grayson @ Debt RoundUp

      You have to start somewhere. Even if you save $10 a month, at least you are saving and getting in the habit. Once you pay off the credit card, then you can put that monthly payment into your savings account each and every month.

  23. CF

    That’s how I tend to approach savings as well. It’s just another item that has to get paid reach month. Otherwise, it’s too easy to find other ways of spending that money.

  24. Julie

    I grew up with “The Wealthy Barber” type parents who always talked about paying myself first. I didn’t truly put it in motion until about 10 years ago and since then it has developed into my most favorite habit! Although I started with pennies from my pay cheque I can proudly say I’ve been putting 10% of my take home into that account with every penny I take home. Goal is to increase this to 15% by the end of this year!

  25. Syed

    Great reminder. Treating my savings/investing amount as an untouchable monthly bill has been the most powerful financial decision I’ve ever made.


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