By Sabrina Karl
For many Americans, paying the bills comes first. Then what we want to buy comes next, followed by any unexpected expenses that become necessary that month. Only after that do many households get to plans for saving.
The problem is that often, there’s no money left by the time savings are considered. And before you know it, six months have passed, and then a year, and little if any savings have accumulated.
Fortunately, you can beat this with the “pay yourself first” method. In essence, it moves saving higher up your monthly hierarchy, so that it happens consistently every month, rather than get repeatedly scuttled to “I’ll catch up next month” status.
Here’s how to do it. First, decide a monthly amount that you know you can regularly manage saving. It can be smart to start out modestly to build the habit, and then increase your savings amount as you’re able.
Second, shift your mindset a bit, thinking of this as simply another bill you pay every month, just as reliably and on-time as your electric bill. But this bill’s much more satisfying because instead of sending your money to someone else, you’re sending a gift to your future self.
Third, automate it. Set up a monthly transfer on the same day every month from your checking account into a savings account. This is critical, as it won’t require monthly action from you, and also won’t be subject to temptations that might prevent you from making the transfer yourself in any given month.
Anyone can start this, whether you can only afford to save $10 a month or are saving big and can put $1,000 away. Building the habit and the system is what’s most important, and once you’ve gotten that established, making adjustments to the amount is easy.