Savings Account Archives

7 Ways to Become a Saver – Even if You’ve Never Been One Before

If you’ve never been much of a saver in your life, you’re probably finding that your biggest problem is just getting out of the starting gate. That’s likely the reason why the majority of Americans don’t save money.

You get into lifestyle patterns – and not such good ones – that don’t include saving. The only way to get out of that trap is create new patterns that include saving. Once you do, you may find the process is easier to maintain than it is to start.

[Join the 52-week savings challenge to jump-start your savings!]

Here are seven ways to become a saver, even if you never been one before.

Learn To Live At Least A Little Below Your Means

Becoming a saver starts with the ability to live at least a little below your means. The basic idea is to earn say $1,000, live on $900, and have $100 available to put into the bank. Once you establish this pattern, saving becomes easy.

Getting to that point though, may not be so easy. You have to either increase your income (more on that later), lower your living expenses, or some combination of the two. It may be a struggle to get started, but it’s really the only way forward.

Ignore Your Credit Card Debt – For Now

Probably the second biggest reason people never become savers is because their financial attention is fixated on their credit card debt. They assume that there is no point in saving money as long as they have credit card bills. Though there’s some logic to this thinking, it’s hard for people to become savers when they’re focused on paying off credit card bills.

The key to the entire conundrum is the word “revolving” – which is the essence of what credit card debt is (the saying in the lending universe is once a visa, always a visa). You borrow money, you pay it back in increments, but as you do you might continue to borrow. That’s the revolving loan Catch-22. While you are trying to pay off your credit cards, you continue to tap them for emergencies primarily because you have no savings to fall back on.

Though it can sound counter-intuitive, if you want to become a saver, forget about your credit card debt at least for a little while. Get some savings put away first, and then worry about paying off your credit cards.

Stop Using Fresh Credit

When I suggest ignoring your credit card debt, I mean ignoring it completely. That means avoiding using it to incur fresh debt. If you’re not going to concentrate on paying off your credit cards, you absolutely must stop using them completely.

Bonus: If you don’t use your credit cards, you will eventually pay them off simply by making the minimum monthly payment, or something just a little bit higher. This is another reason why it’s more important to establish savings before concentrating on paying off your credit cards. Your credit card balances will fall – simply from not using them – while your savings increase. That’s killing two birds with one stone.

[Here are 20 money saving tips for low income earners!]

Use Payroll Deductions

If it’s difficult for you to take money out of your budget and put into savings, you’ll need a strategy that takes you out of the process. By setting up payroll deductions, and directing the money into a savings account, you remove the decision-making process from the flow. The money automatically goes from your paycheck to your savings account, with no further action on your part.

There’s a saying, “out of sight, out of mind”, and that’s what you establish when you use payroll deductions to fund savings. The whole process takes place without your even being aware of it.

You can do this with a relatively small amount of money too. For example, if you get paid biweekly, and you direct $100 out of each paycheck, after one year you will have $2,600 saved – without your ever much knowing it happened.

A lot of non-savers accumulate a lot of money this way. In fact, it’s the standard way that retirement funding works.

Bank Cash Windfalls

Banking cash windfalls is a way to fast forward the savings process, especially when this is done in combination with payroll deductions. While payroll deductions are building up your savings slowly, adding periodic windfalls moves you ahead much faster.

Plan to bank your next income tax refund check, any bonus checks you receive, or any other windfalls that come your way. This will require a shift in thinking. Many people see windfalls as an opportunity to spend money on a needed or desired purchase. Change that thinking to wanting to see your bank account get bigger. And it will – fast.

Create Extra Income Sources And Bank The Cash

Another way to fast-forward your savings efforts is to create extra income sources specifically for the purpose of saving money. This can be a part-time job, a casual situation (like tutoring or helping a friend with computer problems), taking on overtime work, or even starting your own side business.

This can also be at least part of the solution to developing the all-important ability to live beneath your means. If you find it difficult to cover your living expenses, increasing your income can provide extra cash that you need to fill your savings account.

Make Saving A Lifestyle

Once you have adopted some or all of the steps above, it will be important that you begin to make saving a lifestyle. Everyone is subject to the occasional spending binge, but that’s should never be the normal course in your life. That means that you will have to make saving money your default behavior.

By doing that, you will stack the long-term in your favor. You will first accumulate enough money to cover immediate needs, then enough to begin paying off your debt, and finally plenty of extra for long-term investing.

That’s a blueprint for financial independence! Are you ready to make that a lifestyle?

Have a Budget Account – To Keep You From Raiding Your Emergency Fund

By Kevin M

Most of us are familiar with the concept of an emergency fund and why you need one. It is the most fundamental type of savings that you can have, because it is there to provide a cushion against sudden and unexpected financial issues.

Some people are never able to get an emergency fund going. As a result, they often don’t move on to achieve any level of financial independence because they are constantly faced with emergency situations and no funds to deal with them. Others establish emergency funds, but end up draining them for non-emergency purposes.

The best way to avoid that fate is to set up dual savings accounts – an emergency fund, and a budget account that will prevent you from raiding your emergency fund when it is not absolutely necessary.

Set Clear Definitions For An Emergency

The only way to have a successfully functioning emergency fund is if you set very specific definitions as to what constitutes an emergency, and you never dip into the account unless the crisis fits neatly within the definition.

Everyone’s concept of an emergency fund tends to be a little bit different, but I think that the key definitions are sudden and unexpected. Sudden, as in an event that seems to come out of nowhere. If it is something that you knew was coming, it does not fit within the definition of sudden, and is not a legitimate emergency.

“Unexpected” is another critical definition. If a financial event is truly unexpected, it means that you had no reason to prepare for it in advance. Anything that you do know beforehand should hardly constitute an emergency.

A job loss, for example, can qualify as an emergency because it is sudden and unexpected. Replacing all four tires on your car doesn’t fit either definition, because it is a maintenance item that you knew about long in advance.

An Emergency Fund Should Never Be A General Use Bank Account

An emergency fund should be an account that is special and set apart from the rest of your finances. If you are using your emergency fund simply to cover monthly budget shortfalls, that is not a true emergency fund. It is important to maintain that distinction, otherwise an emergency fund is simply not an emergency fund.

Your checking and savings accounts should represent your general use bank accounts. That means they are available to cover your normal budget, as well as any expected expenses. If there is an imbalance here – that is, an insufficient amount of money in these accounts to cover your expenses – then you have a structural financial problem. The problem could either be insufficient income, or excessive spending. An emergency fund will not fix either of those problems, nor should it be expected to.

Set Up A Budget Account To Handle Expected Expenses

One of the ways to avoid imbalances in your budget, is set up some sort of budget account. This should be an intermediate level account. It should be more accessible than your emergency fund, but less so than your checking and savings.

While your checking and savings should be available to meet your normal spending budget, and your emergency fund is held for true emergencies, a budget account can function as a halfway type of account.

You won’t use this to pay regular bills, but rather you’ll use it as a an account to pay for anticipated expenses. This will largely include maintenance costs and near-term spending priorities. Knowing these expenses are coming up, a budget account will enable you to put money aside in anticipation of meeting them.

Maintenance costs that you should be funding through your budget account can include:

Expected car repair expenses. If for example you expect to average $1,000 per year for car repairs bills, you should be putting away about $80-$90 per month to budget for this.
A roof replacement that’s expected in five years – if the cost will be $6,000, you might want to begin saving about $100 per month in anticipation. The 60 months between now and then will allow you to save the money you need.
Your refrigerator is ten years old, and it will cost $1,000 to replace; figuring it will last another two years, you may want to begin saving at least $40 per month ($1,000 divided by 24 months).

Near term spending priorities might include some of the following:

Saving up money for a family vacation. If you know that you’ll be spending around $3,000 for your vacation, you should be putting $250 into the account each month ($250 X 12 months = $3,000).
Holiday expenses. You can think of your budget account as being something like a Christmas club account – putting away a certain amount of money in anticipation of heavier expenses at the holidays.
Your eight year old looks like she may need braces in a few years – you can begin saving for this in your budget account.

Each of these expense types are fully expected, and therefore they are hardly emergencies. You can and should budget for them, and by having a budget account set up you can do just that. If you do it faithfully, you will not need to raid your emergency fund, nor drain your regular checking and savings accounts.

It seems a bit complicated, but can you see the merit of having dedicated accounts to cover different levels of expenses?

Why We Want To Start A Giving Account

By Khaleef Crumbley

Late last year when I wrote about unexpected financial blessings I mentioned that one of the reasons why we wanted to pay off debt and save money is to be able to help others.

This has been something that my wife and I talked about many times, even before we got married. We both separately had a goal of being in a position to freely help people whenever there was a need, without being restricted by our own needs.

It would be great if someone could come to us needing a few hundred or even thousand dollars, and us being able to help them out. Right now, we’d have to sell things at a loss, make withdrawals from our retirement account (facing stiff penalties), or simply not pay rent or other bills for a period of time, in order to help them out.

Blessed By Someone With A Giving Account

When I wrote the post about financial blessings, I told about a time where I had to depend on the kindness and preparation of someone who I barely knew…

A long time ago I had a little bit of trouble with my driver’s license. Because of this, I needed to pay off my financed car immediately. The only thing is that I was broke and I still owed $2,000 on the car! If I couldn’t come up with the money in a short period of time (like a week or 2), they would repossess the car.

My wife (who was just my girlfriend at the time) told her best friend about my problem. He then offered to give me a loan for the full amount and allow me to pay it back over 8 months without interest! My car payments were about $241/month, and I was able to pay him back at $250/month.

I had met him a few times and we were cool, but I wouldn’t consider us friends at that point. However, he still felt moved to help me with such a large gift. At that time I was working full time and I went back to school – I couldn’t afford to have my car repossessed.

His generosity really helped me get through a very tough time, and he was able to part with this money because he had it set aside in a giving account.

So there is one time where I have been the recipient of an unexpected financial blessing from someone I barely knew. Over the years I have had family members and friends step in to help my out financial at various times. I definitely know what it feels like to not be able to get out of a situation on my own, and having to depend on the kindness of others.

As I began to grow in Christ, I have come to realize that it was really God working through these people over the years (which is why the always come along at the “right” time). This has really helped to fuel my passion for wanting to help others.

Since my wife and I have the same desire, this will be an imperative in our marriage going forward!

Setting Up A Giving Account

To us, the biggest part of being able to help people in need when they need it, is for us to make those sacrifices a normal part of our lives. What I mean by that is that we plan to set up a savings account which will only be used when someone comes to us (or to our church).

Our goal is to put money aside with each paycheck in order to build up this “giving account”. This way, it will be much easier to give to someone without there being a major disruption to our finances. It will be much easier to give someone $1,000 if we actually have $5,000 put aside for that purpose, rather than pulling it out of our emergency fund or, worse yet, our operating budget!

So just like I believe that our savings can be set aside for various spending purposes (housing, college, emergencies, retirement, etc.), I also believe that if giving is extremely important to you, this type of savings account can be very beneficial.

We would hate to be in a situation where someone desperately needs help, we feel that God is leading us to help, but we don’t have the resources at the moment. That’s why we want to be as prepared as possible. So essentially, we would be setting up another emergency fund, but it would just be for the emergency of another person/family.

For those who are concerned that this would take the sacrificial nature out of giving, consider this: The amount that goes into the account from each paycheck will be a sacrifice for us; we are simply making the sacrifice every 2 weeks rather than making it at one time.

This way, we can take advantage of the times where we haven’t come across someone in need, so that our giving can be larger in amount, reach, and impact. So instead of finding a way to come up with a significant amount of money at once, the sum of our smaller, but regular sacrifices may provide enough for us to meet the need more fully.

Unfortunately, because we still paying off debt and find ourselves deep in debt bondage, we are not able to start building this type of account. But the fact that this is so important to us provides us with a significant motivation to pay off our debt as quickly as possible.

What About You?

How do you manage the money that you give above your “normal” giving to your local church? Do you save money for that purpose and then give when something comes up, or do you simply pull the money from your checking account when the need arises?
If you are married, has there ever been a time where you and your spouse have disagreed on trying to help someone? If so, how did you resolve the situation?