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A study shows that 65% of Americans have little money saved. This is a statistic that we can all collectively change.
When you decide to start saving, it’s usually not a fun decision. It’s a decision made out of necessity, and you’re really not too excited about it.
Often times we think we need to make BIG sweeping change, like saving $5,000 within 6 months or $2,000 within two weeks, otherwise our progress isn’t worthwhile.
That’s not the case. Actually, small savings habits over time are really what’s going to make a difference in your savings account.
Here’s how to save money each paycheck with a simple savings strategy:
Open Different Savings Accounts
The first step is creating different accounts for your money. Your money should be separated for your different needs—bills, fun money, savings, etc.
You have two options here: You can open up different accounts with your current bank or you can go online and open up a new account with a bank that has a ton of online banking features. This way your money is in a few different places, which makes it less readily available for you to spend all of it.
Capital One 360 is an option that has an entire suite of products you can open. You can open a checking account along with multiple attached savings accounts. You can also nickname your accounts for your different goals.
You can also shop for accounts below:
Set Up Paycheck Allocations According to Budget
The next step is coming up with allocations that you’ll distribute to each of your accounts whenever you get your paycheck.
The beauty of this method compared to line-item budgeting is you don’t need to maintain spreadsheets or anything. You just need to spend an afternoon deciding how much money needs to go into each of your accounts when you get paid.
There are two ways you can go this:
Use a percentage method. A percentage method is when you choose a set percentage that serves for your “budget.” For example, you can do 60% to bills, groceries, and gas, 15% to saving, 15% to extra debt payments, and 10% to an allowance. I teach you to make an AWESOME and SIMPLE budget using the percentage method here.
On pay day when the check hits your account, you immediately divide up your paycheck to your different accounts.
In this case:
- Bills—Immediately put 60% of your paycheck into your bills account. Set up automatic payments to withdrawal bills from this account. Use the remaining cash after the auto-payments for variable expenses like gas and groceries.
- Savings—Immediately put 15% of your paycheck into your saving accounts(s).
- Extra debt payments—If you want to get ahead on debt, you can immediately use 15% of your check to make extra payments on your credit cards or other debt.
- Allowance—It’s good to have a bit of fun money. Without it you can start feeling sorry for yourself and splurge. You could put an immediate 15% in another account that you have open specifically for fun stuff. You can also withdrawal this amount in cash if you prefer.
Use a more exact formula. If percentages aren’t yo’ thing, you can also consider using exact figures to deposit into your various accounts after each paycheck.
For example, you could add up all of your bills for the month including your variable expenses and put that into your bills account instead. Do the same thing with your allowance and other allocations.
You can also decide on an exact savings amount. If you want to save $500 each paycheck. Set up an immediate transfer for $500 into your savings account to occur biweekly!
How to Make This Work Long-Term
Moving forward with this plan to budget your paycheck is fairly simple.
Write down your allocations. Put it in a journal, on the fridge, or in your phone. As soon as the paycheck hits your account, pull out your allocations and distribute the money.
Put the amount into savings that you assigned for savings. Put the amount in the bills account dedicated for bills. Give yourself your allowance. Do whatever allocations you set.
With this approach, you don’t have to do a lot of money planning during the month. You don’t have to budget down to every penny either. Who has time for that?
You just need to put your money where it needs to be. Continue with this plan and you’ll hopefully begin to see hundreds and eventually thousands of dollars appear in your savings account.
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