I’ve Paid For This Twice Already…

Archive for the ‘savings’ Category

The successes in my life have everything to do with accountability.  Without accountability, I tend to let things drift.  There always seems to be something else out there that is holding me accountable that i need to deal with, and I let the things that can slide, slide.  That’s the main reason I started this blog - once I committed in my head and heart to debt reduction, I needed an outlet to keep track of what I was doing and keep me accountable doing so.

Saving money has always been a nebulous area for me.  There are many things one should save for, but few hard and fast numbers I can hold on to.  The starting point is an emergency fund, and with some thought, research, and planning, I can come up with hard and fast numbers to latch onto there.  But I also want to save for retirement.  But I have no real idea how long I’ll live, and how much I’ll need.   I want to save for my kids’ college educations, and I can make some guesses but I’m not sure what i need there, either.  And what about future life changes, like home improvements, new (to us) cars, and other things that come up?

Without hard and fast numbers, I tend to let things drift.  Which is why setting specific goals is so important for success in these areas.  With debt reduction, there have been specific numbers and targets to reach all along the way.  This has been a key element to my success at it thus far.  But with saving, the idea of saving “everything I can” isn’t a good long-term outlook.  I can only live in a position of deprivation for so long before I start to rebel against it.  I have become accustomed (and even enjoy) some of the “deprivations” we’ve created, but life is, after all, meant to be lived.  There needs to be a balance of enjoyment and sacrifice (within one’s means, of course) in any life.  So setting specific savings goals will be key to becoming a successful saver.

So that’s my goal for the next few months.  As I start to see the light at the end of the tunnel on my non-mortgage debt, I’ll start to figure out how to set realistic savings goals, how to make them motivating, and how to reach them.

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We’ve all heard the phrase “Pay yourself first”, but what does it really mean?  At its essence, paying yourself first is saving money for yourself before you give it to everyone else.  I use the term “give” loosely, I am not talking about specifically charitable giving or anything like that, more anything you spend money on, be it bills, shopping, or anything else.  It is a simple concept, pay yourself first, but one that a large amount of people do not follow.  Why?  Because it is easier to spend than save?  Because it is easier to pay those who are asking for your money than give it to yourself?  because it doesn’t seem like there is enough to go around?  Whatever the reason, here are five concrete ways you can start getting into the habit of paying yourself first.

1.  Set up an automatic paycheck deduction/savings deposit.  You don’t have to start at the top to do this.  Yes, we’ve heard you are supposed to save 10% of your salary but you don’t have to start there.  Set up an automatic deduction out of your paycheck to go into your savings account (or an automatic deposit out of your checking into your savings) for just $25 a month.  Just do it.  You’ll get used to having that money automatically saved for you, and you can build it up to a bigger amount later.

2.  Put one item back at the store, and deposit the savings.  Before you leave the store when shopping, go through your cart and put one item back.  Write down how much that item would have cost, and then when you get home, do an online transfer from your checking account to your savings account for that amount.

3.  Skip your habit once, and deposit the savings.  Do you have a habit that costs you money?  Be it smoking or coffee or eating out or books or anything else, I’m not asking you to give it up for good.  Just for one day.  Refrain from your daily (or weekly) habit one time, and then deposit the savings into your savings account.

4.  Sell one item, and deposit the profits.  If you are like most people, there is at least one item in your house that is underutilized and you could sell for something.  Use craigslist or e-bay or even a note on a bulletin board and sell one item.  Just one.  And deposit the profits made into your savings account.

5.  Make a phone call, record the savings. What services do you have, and what might you be able to pay less for?  From interest rates to insurance payments to calbe TV, look at all of your services, and identify where you might not be getting the best deal.  make a phone call - and when you reduce a payment, deposit the savings.

There’s a recurring theme here, and it is for a reason.  Deposit the savings.  Don’t just save hypothetical money through actions - actively *save* that money concretely somewhere.  And don’t stop with these ideas - this is just the springboard to get your toes wet.  The more you make paying yourself first a habit, the more likely you are to do it.  And the more likely you are to do it, the more times you will follow through and pay yourself first.  Even little payments to yourself can over time add up.  Keep that big picture in mind, and make a payment to yourself today.

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When I started my first real job at 14, I didn’t have many expenses. I lived at home with my parents, I wasn’t old enough to drive, I didn’t have a significant other (yet) to spend money on. So I saved the vast majority of my earnings. Although I instinctively enjoyed the idea of saving my money (my brothers, on the other hand, called it hoarding), I thought I needed a purpose for saving. So I gave the money a specific purpose, and saved my money to buy a car when I was old enough to drive. And that is exactly what I did with it.

Now I am not trying to claim that money shouldn’t be saved for specific purposes. But the idea that was missing from my financial vocabulary was the idea of saving money “just because”. I now have an emergency fund, and although there are a lot of things it could potentially be used for, it doesn’t have a specific purpose preassigned to it. I save it just because. Just in case I need it. Just because some money should be saved. And hopefully, at some point in the future, I will save a very large amount (to me) of money, between $15,000 and $20,000, just because.

This is a very new concept for me to embrace. It was a hard thing for me to wrap my head around, this idea of saving money with no specific preassigned purpose for it other than to be there in case it is needed. And certainly, the idea of saving a large amount of money with no absolute and certain predetermined assignment is still a hard one for me to completely embrace. I’ve never had a significantly large amount of money saved for anything, especially not one that was five figures. I don’t think I have ever had a bank balance with five figures before, and our retirement savings is currently barely into five figure land. The idea of saving that much money without knowing exactly what it will be used for is a very strange concept to me indeed.

But if I have learned nothing else over the past year of blogging about my finances, I have learned to expect the unexpected, and that being prepared is a much better alternative to being unprepared for what life may bring. We’ve weathered a few financial challenges, and the one where we were prepared to handle the difficulty without turning to debt was a much smoother and less traumatic ordeal than when we had no idea how we would get through the difficulty.

I’m an emergency fund believer, a convert, and an embracer of the just because mantra. And we will continue to save money, slowly but surely, just because.

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I just wrote about my budget busters, just in time for something completely different to waltz right in and bust my budget wide open. It is related to one of the things I mentioned, the lack of experience budgeting - but it isn’t something I was thinking about when I wrote that post.

Argh! Well, now that that is out of my system, on to the explanation.

Wednesday night we had the blower in our furnace running to circulate some air throughout the house. When my spouse turned it off (at the thermostat) before bed, it didn’t turn off. Not being the technically savvy type, we hypothesized it was the thermostat going bad, and went to bed. Yesterday morning, I called our service company and they came out to check things out.

The technician came, and while he was troubleshooting the furnace, the fan turned itself off. Nice timing. The good news is that the technician says the thermostat is fine. The bad news is, he thinks the board in our furnace is going bad. What he said is that he thinks the relay that turns the fan on and off got stuck. The technician said he thought it would be okay until the fall, because it was the heat relay and not the cold relay. But the fan mysteriously came on again last night, so it probably isn’t okay. The only way to completely fix it is to replace the board, or replace the furnace.

The furnace is 22 years old. It has already outlasted its typical lifespan by 2 years and making a big investment of a new board in it would not be a smart long term move. Basically, this is a sign of things to come. A warning, if you will. Hey, I really wanted a more energy-efficient furnace, after all…

Coupled with the fact that I had a medical procedure on Tuesday that is sure to be expensive, we’ve decided to be proactive and shift the priority from debt repayment to saving for a short while until we get some things worked out. At this point, unless we find out the furnace needs to be replaced immediately, the debt snowball or $810.40 will continue to go towards debt repayment, plus a small bit so that we can make double payments to the spouse’s student loan (the debt snowball has $437.59 per month toward the student loan and we will up that to about $470) but all other snowflakes will be going into our savings account for a new furnace plus medical expenses. We’ll know more about the medical expense part after next week when I talk to my doctor about the results of the tests I had. But just the tests will cost money that we would rather save now versus take out of our emergency fund if we don’t have to.

This is all up for adjustment, and we may end up saving everything past the minimum debt payments if we need to of course, especially if the furnace continues to misbehave. It would be nice to continue the debt reduction in some fashion and continue to make the student loan double payments, but I am okay with not doing that if our finances warrant it. Dependent on the results of the tests I had, and our research into a new furnace, we may up the amount we need to save even more. But right now, we are guessing we’ll need about $5000 for the furnace and my tests. Once we put our economic stimulus check into savings, as well as my spouse’s additional paycheck in May (he is paid biweekly and May is a three paycheck month), plus what we have in savings already, we need to save about another $1000 to $1500. If we haven’t replaced the furnace by then, (and that number remains appropriate), we can shift back into significant debt overpayment and slay the student loan. We managed the huge car repair, we’ll manage this too. I knew things were sailing along too smoothly, and there were bound to be more bumps in the road. I was just hoping to get rid of the spouse’s student loan before we hit another one. So it turns out we may become consumers with the economic stimulus check after all, because it seems it will ultimately go towards a new furnace. The world has a funny idea of irony, that’s for sure.

Roll with the punches, I keep telling myself. This whole debt repayment thing is a huge game of adaptation. But, once more… Argh!

The technician who came for the furnace call checked my a/c unit as well and called the whole trip my yearly a/c service, so that was nice. At least I didn’t have to pay anything for that. However, the call I make this morning to have them come back… I assume I will have to pay for. But something better actually be completely diagnosed and fixed this time. Or something.

Argh!

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We’re In Debt is holding a group writing project this week talking about savings and encouraging saving.

I’ve always been a little wary of making things automated. Ever since I had an automatic debit to AT&T for my phone bill that even though I canceled it, restarted itself and started billing me for the next people that had my old phone number (which got sorted out but was a huge pain) I’ve felt irrationally biased against anything automatic. That isn’t so say I don’t have anything on automatic debit ever, but it just makes me a little more nervous than it should.

That, combined with the fact that we’re still in debt, and that my spouse gets paid on an irregular schedule in respect to what day of the month he gets paid, has made me hesitant about putting our current savings objectives on automated debits. Which is silly, because something that is forcing us to save is not that same as a bill that may or may not be ours to pay. But hesitant I am, and I’m working on talking myself into setting up automated savings through my ING account.

Every month, I save only $75 right now (excluding the 401K contribution, which is automatically deducted from my spouse’s paycheck). I put $25 in each of my two children’s college funds, and $25 into my “long term” savings fund that will eventually form the base of savings for things like replacing our car and necessary home improvements. Not a whole lot of savings, and when we are out of non-mortgage debt, I will be upping all three of those as well as adding an emergency fund savings (our emergency fund is $1000 right now and already fully funded). And of course, if I set up automated savings now, I can change it in the future to reflect our new savings goals.

Which I guess is the key to the matter for me. I’m afraid that changing it will be difficult and it won’t work correctly and it will cause a huge mess. But that is silly - I am sure it will be fine and not hugely difficult to change once I want to increase them, but the irrational voice in my head says to hold off and wait until we’re saving the “goal” amount every month.

Even without an automated plan I have been consistently saving these amounts every month - I do like the hands-on-ness of doing it myself. But it would certainly be easier to have it done for me.

So what’s your experience? Do automated savings plans make saving easier for you? Do you end up saving more using methods such as these?

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