Here are some of the most common complaints I hear:
“I really don’t live an extravagant lifestyle, but for some reason, there’s never any money left over to save.”
“I thought I wasn’t getting paid enough to save, but then I got a raise, and I’m still not saving. Where is all of my money going?!”
How we traditionally try to save money doesn’t work. We get our paycheck, then we pay our bills, live our lives, and even get people gifts. We wait and hope that there will be money leftover to save for ourselves. There’s not.
Then we think, if we earned more money, we’d finally start saving. We get the raise, earn our higher paycheck, then we pay our bills and life our lives. We hope there will be money leftover to save. There’s still not.
One of the reasons this happens is Parkinson’s law. Parkinson’s law is the idea that things take up as much space as we give them or adage “work expands so as to fill the time available for its completion.” It’s the reason our junk drawers always fill up (regardless of how much I try to Konmari them) and the reason why meetings take up exactly as much time as we schedule for them - even if we only have one item on the agenda. And you guessed it - it’s the reason that our expenses always fill up our bank accounts. Sometimes down to the cent.
The good news is that we can use Parkinson’s law to our advantage. Here’s how we can finally set up a system to start saving.
1. Make savings separate. Whether consciously or subconsciously (or probably a bit of both), when we see money in our accounts, it feels available to us and that affects our spending decisions. There are a few unicorns out there who are able to save money in the savings account attached to their checking account, but for most of us, that money is too easy to transfer over and we end up struggling to keep anything in savings. It’s really helpful not to see that money every time we log in.
I’m a big fan and user of online savings accounts for a few reasons:
They are out of sight and out of mind from our checking accounts. This makes the money feel a lot less available, even though we could transfer it over in a few days notice.
They earn interest! Right now you can get over 2% in your online savings which is over 200x better than what we get with our brick and mortar banks. If we keep a $15,000 rainy day fund in our online savings accounts, at 2.2%, we’d earn $330 per year for doing nothing.
They are free. These accounts should cost no money to set up and there is no monthly fee.
An added bonus. In these accounts, you are able to open multiple accounts and name them at no additional charge. I find it really helpful to have every dollar in savings have a job, rather than have a big blob of savings that you have to account for you in your head. You can open accounts for each of your goals and fund them accordingly.
Be sure to check restrictions. For most of these accounts, there is a transfer limit of six times per month. But in most cases you aren’t charged a fee for going over the limit, they just politely kick you out of the account.
2. Automate to pay ourselves first. Once we have a separate savings account, we want to treat saving like we would any other expense. You know... like the bills we always pay? When we set savings up to transfer automatically we prioritize paying ourselves first. I recommend having the transfer go through right after your paycheck clears.
If most of your larger bills, like rent, happen at the beginning of the month, you can set your transfer to savings to happen after the second paycheck to smooth out your expenses.
If you are thinking, “Ashley, there is no way I can save, I’m living paycheck to paycheck,” that’s okay! Start with as little as $5 per week or even $5 per month. You can check back in a month or two to see if you missed it. If you didn’t, you can up the ante!
Once you take those two steps, you are officially a saver! That’s worth celebrating!