Directly, Automatically Protecting Myself
5 September 2007 by gildedbutterfly
Most of the pf world will tell you that automatic savings is the only way to go. Because it’s easier to do nothing than something (as I recently found out), if you have a portion of your money automatically going to savings and investments, you’ll often find yourself adjusting to living without that money instead of actively calling the bank to change the adjustment.
I agree with all that, to a point. Internet banking has somewhat changed that; I find it’s really easy now for me to “skip” a month of savings simply by logging onto my accounts and making the changes online. It takes less than 5 minutes, and it’s a constant temptation that I have to fight against. (Though I haven’t actually given into the temptation in almost a year.) Even my 401(k) contributions can be changed in less than 5 minutes online, which is great if I want to raise my contributions, but not so great when I start wondering if I should contribute less.
However, I did figure out an automatic savings plan that is working well for me. Back in July, I filled out a bunch of paperwork and mailed it in to the company that handles payroll for my company. Essentially, I registered a new EmigrantDirect savings account with the payroll company and asked them to directly deposit $50 of every paycheck into that account. I almost never check the savings account, which isn’t linked to my checking account, and I’m using that as a way to build a solid emergency cushion that I won’t want to touch. (Since it isn’t linked to checking, it’d take effort to get the money out, which means I probably won’t do it unless it’s an actual emergency.)
Anyway, suddenly that account has $250 in it. When I checked it the other day, I felt like saying, “When did that happen?!” I haven’t missed the $100/month at all, and it’s suddenly worth what I consider to be “serious money.” (Anything over $250 is serious money for me. Don’t know why, but that’s where I feel an emotional high that I have that much.) The best part is that, most days, I don’t consider it part of my money, so I don’t feel any urge to spend it at all. The only time I check it is when I do my monthly wrap-up to figure out how much I have.
I love direct deposit! 
That’s a great idea! I think that would work for me too. Right now my savings is WAY too accessible. I can withdraw money from it with an ATM card…yikes.
Awesome! When I start saving a little more here or there, I never usually notice a difference in my budget … maybe I should start something like that too! *runs to go call payroll*
I have my pay checks from my second job automatically deposited into a down payment savings account…since I never had access to the money before, I don’t even realize I don’t get to spend it. Also, I don’t mind the weeks when I only work an hour or two…so the pay check is about $15!
I agree that it’s been far too easy for me to “skip” savings months in my EF/money market–which I’ve been doing a lot of lately to cover all sorts of purchases. In fact, I’ve been changing the amounts of my auto-investments almost every month for the past few months! There’s nothing automatic about that!
I do have accounts with mental blocks on them, though, like retirement accounts and anything “invested”–like my bond fund (for RE investing) and growth index fund (for some future undetermined purpose). For whatever reason raiding those is not a temptation for me at all–though it is tempting to “skip” an automatic investment when I want something that’s not in the budget…
Ms. M&P–That’s always been my problem in the past: I’ll build up a nice little EF (as high as $6000 at one point) and then spend it on non-emergencies because the money was so easy to get to.
Krystal–
Lemme know if it works for you, too.
SavingDiva–Yeah, that’s another great way to go about it. I actually made this change at the same time that I made a bunch of other changes in my life (got a roommate, upped my 401(k) contributions, etc), so I didn’t even notice that it was gone from my paycheck, because my entire paycheck and my entire budget was changed.
Meg–I’m the same way with my reitrement accounts. When I start to panic about finances, I always remind myself that my Roth IRA could be an emergency fund, but really that’s not an option for me b/c of my mental block towards those funds. But I also had the problem with wanting to skip my automatic savings, so this helps circumvent it.
Thanks for the comments! Keep ‘em coming!
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