In the last couple of years, my husband and I have relished getting “on our feet” financially — we paid off our loans and bought a house, and were generally living within our means. It was an accomplishment to get that far, and I was somewhat at a loss for what we needed to do next.
In my happiness to have any money in the bank, I started keeping a pretty large buffer in our checking account, even though our savings was easy to transfer into and out of, being all at the same bank. The large buffer (usually around $2,000) was justified in my mind because we’d purchased a 100-year-old house, and sometimes we had to spend large figures just on home repair, and I really liked being able to do these repairs without payment plans.
However, it became apparent that the buffer made us pretty lazy — it turns out that there is something really valuable about the momentary thought, “Is there enough in the bank account?” This doesn’t mean that it is fun to be living paycheck-to-paycheck, and it doesn’t mean that anyone would aim to stress themselves out over cash. What I’m referring to is the sneaky way that having the ability to access funds tempts us to spend without thinking.
This is true whether you have a high credit card limit or just a big buffer in checking — it’s so much harder to save when you aren’t evaluating every purchase. So we set about changing our habit.
Here it is: on the last day of every month, we transfer everything in checking into savings, except for my latest paycheck. So if we have $4,000 in the account, and I just got $2,000 from my job, we transfer out $2,000 into savings.
In this way, we are “artificially” living paycheck to paycheck. The only money available in checking is that which I just finished earning the month before.
This is wonderful for a few reasons:
1. I start the month with the end of the month in mind.
With a big buffer in my checking, I don’t really notice the rhythms of the month, and I don’t put off purchases as if I need to wait. With only my paycheck (and my husband’s, which comes mid-month), I rarely make a purchase at the time when I think of it. Instead, I think about how long we have till the next paycheck, and when might be a better time to make the purchase. By the time it is possible to buy something, I often have lost the urge to get the thing, and I end up saving the money instead.
2. I can scrimp in general without depriving myself of ALL of one thing.
For the longest time, I’ve tried to save more by cutting down on specific spending categories: restaurants, books, clothes, drinks. Those challenges do teach me things, but I rarely can keep them up, because they put me in scarcity mindset: when I am not allowed to eat out at restaurants, all I think about are restaurants! What’s nice about not having a huge buffer in my account is that I can’t do everything, but rather than telling myself no every time, I’m saying “do I really want this more than I want to keep that money around for something else?” — I tend to see the answer to that question in a very different light, and often save rather than spending.
3. If big expenses come up, the money is still right there, just one step away.
I would never feel comfortable transferring from savings to checking just to get a new pair of ballet flats, but when expensive car repair or a big insurance bill shows up, the bank makes it very easy to transfer money instantly to checking and make my payments. It’s one small step that makes me unlikely to frivolously move savings, but doesn’t decrease my security financially.
4. Every month, the positive “jolt” of what I save makes me want to continue.
I mentioned already that “challenges” rarely have staying power for me, but this one does: every last-day-of-the-month, I get to celebrate the money that I transfer — for us, it’s been about $1,300 a month, adding up to $4,000 in only three months! I love this strategy because the “reward” isn’t spending, it’s the act of getting to move a big sum into savings.
$4,000 isn’t at the point where my husband and I want to start thinking about investing or moving it — right now, honestly, it’s the start of a used car fund for when his dies in the next year or two — but that would be the long-term outcome of storing your “buffer” money in your savings account. Every purchase is read through the lenses of “is this the right time of month for this?” and “Would I rather use this for something I’m really excited about, since there is only so much money in the account?” and “Does this even feel as good as transferring this amount of money into savings feels?”
Obviously, we’ve gotten lucky that these three months haven’t had huge expenses that wiped out that buffer, but now we’ve got $4,000 for any future situations, a large part of which we might have mindlessly spent otherwise. I’m excited to see how this habit can continue to help us in the future.
Laura Marie is a writer and teacher in Ohio. She blogs about the stories behind family recipes at Recipe In A Bottle.
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