Tuesday, January 18, 2011

Savings Made Easy

If you're anything like me, you like to stash money away. Be it a worry about your nearly-antiquated truck's transmission health or funds for a vacation in Florida, chances are you're not going to have the cash on hand to pay for these things when you want or need them. Charging them is always an option, but I'm not a big believer in credit if you can avoid it. I learned this lesson when I was 18 years old; it wasn't an easy lesson.

Through a lot of bad experiences, I learned that money is something you should hide and forget about until you need it. You won't even miss a few bucks every week, especially if you're clever about it. ($5 a week for 52 weeks is $260! How much do you spend on coffee a week? Lunch? Gas? Shoes? Snacks? Soda? Bottled water? Audit yourself.... maybe you could do without that 36 pack of Diet Pepsi this month!)

Recently, I've tried to figure out a way to have all of my savings accounts automatically fed money from my main "daily use" bank account. I've had an ING Direct account for years, thanks to one of my best friends who told me about it. The return on it was pretty good back before the economy crashed, but these days, I just use it as a banking hub and savings account, not for interest purposes. It's the only bank that I've found that will transfer money in and out for free. These transfers only take a few days. My regular banks (I use 2: one local, one national) charge exorbitantly for "wire" fees. Eff that. Use ING. Most banks will transfer internal funds back and forth between accounts for free, but be sure to check if you plan to transfer money between accounts using the same bank. (I have 3 accounts at our local bank which have free transfers internally)

I use my ING account to send money to all of my accounts. We use heating oil here in our house. This is expensive, but only during the winter months! During the summer, it's an ignored expense, which causes a lot of bullshit to put up with come winter. It's best to calculate what we need over the year as a total, and divide it up among 12 months, financing our own heating oil.

Each month, I send my share of the "oil money" from my daily use account to the ING account, using ING's Automatic Savings Plan. The account has an automatic withdrawal set so on X day of Y month/week, ING will send $Z to my external "oil account" at my local bank. This is done seamlessly, so I don't have to worry about writing myself checks and shuttling back and forth between banks every week or month. I hardly notice the money leaving, honestly.

I do this with our road trip fund as well. Not only will we have the money, but when the time comes for us to take off, I'll have a handy debit card to use all the money I've been saving for the trip.

The secret to the savings in this fashion is to take out small amounts of money that you won't miss too much on a weekly or monthly basis. Instead of going out for lunch every day at work, take that $5 and put it into savings. That's $25 a week, which turns out to be $1300 a year. Once you start catching yourself on all the crazy shit you don't need to be buying, you'll see your bank account(s) grow. But don't overdo it! If you can't afford $5 lunches every day, don't save $5 a day! Even if you can afford a quarter every day, you should do it. It still works out to be almost $100 at the end of the year, and did that hurt at all? Put it towards a credit card bill, a camping trip, or just Thanksgiving dinner funds! This system works best for me, but if you have something in mind of your own, do it!

This isn't an advert for ING. If I knew of another bank who did what they do, I'd probably try them just as well. Maybe your bank does this locally! Do your research, spend a few minutes to figure out your own ropes and what you can do, and watch the money add up. It's incredibly rewarding, both emotionally and physically.


Unapologetically Mundane said...

I started using smartypig.com for just this reason. When I have the money in my checking account, I just blow it on clothes or shoes or meals I won't remember five hours later, so it's best if I just ship my money off before I ever see it. I set up a recurring transaction that transfers money from my checking account to my Smarty savings account once a month, and then they pay a decent dividend (1.3-something percent right now) to store it there until I decide to transfer it back and use it.

I wish someone had give me your $5-a-week advice years ago, because I waited a few years to set up a 401k at work, thinking I'd really notice if a percentage of my salary disappeared with each check. Of course I didn't.

I just found you through one of my new blogfriends and think I'm going to like you real well.

Michelle said...

I used to work for a stockbroking firm and it was a revelation to find out about all the different finance products available if you look outside the standard banks. I left stockbroking 10 years ago, but still have my savings with the firm I worked for - it earns a good return and best of all they have a phone number that is answered by a person, not a machine! My top saving tips are to cook at home and avoid takeaway (our downfall!) and be a one car family. Oh, and our chooks were initially an expensive outlay, but now they are paying for themselves eating leftover food and turning it into their tasty eggs.

Sassafrass said...

Unapologetically Mundane! Spartpig.com sounds interesting, I'm going to have to look into it! I honestly didn't do a whole lot of research regarding my options on the banking front, especially since I'm insane paranoid about all this technology and money being funneled through it all... kind of scares me sometimes. I must be getting old!

Michelle, I'm guessing chooks are chickens?? I wish I was able to keep chickens. :(

I also wish I knew more about investment options. Everything seems to technical and complicated... I often wonder if I'm too slow for high class investing.