We all want more money, but we all also HATE hearing (reading) about how important it is to budget. The same tired messages of ‘pay yourself first’ and ‘save for a rainy day’ are downright maddening. Ugh. The truth is, saving can be hard. I mean honestly, how on earth am I really supposed to take care of my living expenses, pay for my adult responsibilities (here’s looking at you car insurance!), finance my dreams AND buy shoes? I mean seriously.
Sometimes it is easy to forget that saving really is the foundation of this whole “create passive income and live the life of your dreams” movement.
Without having a stash of disposable income, investing in anything is really out of the question, right? Well, here is my trick to set money aside for investing:
The secret is to trick yourself into thinking you have no money.
I can already hear some of you thinking ‘I really do have no money…’ I bet you have more money than you think. Try keeping your checking account balance so low so that if you go over budget, you overdraft. For the purposes of saving money this is actually a really powerful concept. Here’s how it works:
- To start, gather all your monthly expenses and place them in order by due date.
- Next, set automatic deductions for your expenses two to three days after your paycheck is deposited.
- If you are paid 1st and the 15th, then separate the expenses into two categories. Bills due between 1-14th of the month go in one category, bills due between the 15-30th of the month go in the other. The first half expenses should be withdrawn monthly on the 3rd, and the second half expenses are withdrawn on the 18th.
This means that by the end of the week you get paid, your account balance is back low and the temptation to spend is gone. That’s because it’s already spent.
Consider your savings a necessary monthly expense
The power of this technique happens when you consider your savings as one of your monthly expenses that is automatically withdrawn. By allowing your bank to automatically draft $300 from your checking account to your savings account as soon as your paycheck arrives, you make the saving effortless. To make the plan practically foolproof, I also suggest depositing the money into a savings accounts at a different bank. Preferably one that does not issue checks or a debit card for the account.
When the dollars are in a totally different account, you do not see them, therefore you do not miss them. It’s basically equivalent to having spent money on a nice dinner out. Once the money’s gone, it’s gone. You just have to make due with what’s left. Same thing here.
So now I’ve let you all in on my little mind game money secret to boost savings. This is the linchpin to my cash management system that allowed me to save money to start investing real estate.
Richelle Thomas is a personal finance and real estate blogger for LifeLlibertyNProperty.com. The website shows people how to get started generating passive income in real estate, so they can have more personal liberty and financial freedom.