I spent the first half of my twenties in a pretty familiar boat: low income and low expenses. Sure, my three college jobs didn’t pay well, but I had four roommates and did my best to cook my meals or eat on campus. My first couple of jobs after college also didn’t pay extremely well, but I had a little bit saved up from summer camp jobs. It didn’t feel like a big, reckless thing to save almost nothing. My grad school years, which ended on my 26th birthday, were no different; I just had to keep my monthly income and my monthly spending pretty similar, and I could use my savings as a buffer.
However, during this time, I wasn’t saving toward a house, or toward retirement, or really toward anything. It wasn’t until I faced getting married and combining finances that I figured out that there were upcoming expenses — and a lot of them. When we started talking about our finances together honestly, my fiancé and I realized that we needed to start preparing for the future. Fortunately for us, our incomes were about to go up — way up! He was just through his first 90 days at his first full-time job, and I had a promise of employment secured for after graduating from my Master’s program.
But we were a little nervous, honestly, about having our income go up. We would still be entry-level in our respective fields, but money, more of it than we’d ever seen, would be landing in our new joint checking account very soon. We made a choice then that just seemed like good sense at the time, but that in the end has served us very well: we decided to try to hide our increases in income from ourselves.
Rather than keeping a big checking account buffer that would help us feel at ease in our finances, we didn’t give ourselves any excuses to spend extra. We attempted, as much as we could, to hide our newfound disposable income. Here’s how:
First Hiding Place: Automatic Retirement and HSA Deductions
I knew that FICA and other taxes were coming out automatically from my paycheck, but when I met with HR in my first full-time job, I also signed up for a full 10% of my salary to go straight to retirement. I figured it this way: if that was too big an amount, I’d always be able to change it, and if it was an amount I could live with, I’d probably never bother to bring it down. I’d never get used to having that 10%.
This doesn’t work for everyone, but it can be applied to things like debt payments; automate a payment that is a few percent more than the minimum, for instance, and see how hard it is to live on the remainder. (If it is too hard, definitely go back to the minimum! The point is to find a space where there isn’t excess disposable income taunting you to spend, not to scrimp miserably.) Even if you start with 1% or 2% or whatever your employer will match, hiding that money immediately keeps you from getting comfortable with your new income before you choose to save.
Every time I get a raise, even a little one, or we cut down an expense (yay for calling the internet company and getting a lower rate), I try to bump my retirement savings. I’m at 15% now, and I also max out my HSA each year, since the money is tax advantaged, and I could definitely use a little medical-related emergency fund in the future.
Second Hiding Place: Extra Mortgage Payments
This path definitely is for the privileged folks who are living in an area where affording real estate is possible, but there are still places out there. In the areas we were looking, $150,000 to $250,000 was pretty normal for a nice, suburban home –which not true in a ton of metro areas. Weirded out by being able to afford a mortgage on our entry-level salaries, we went really conservative, buying a 100-year-old home in a less-affluent city for under $100K ($93,500, to be exact). All the monthly payments, including insurance and taxes, came in at under $800.
We were each paying almost that much for our small apartments before we got married, so the idea of reducing our expenses by buying a house was nerve-wracking, to say the least. We decided that, upon moving into the house, we would do at least two things: pay ahead on the mortgage approximately as much as our housing had cost before, and save a decent chunk in a savings account for repairs (there were quite a few needed; yay homeownership…).
The result was that we were cutting the principal on our mortgage fast; if, by the end of the month, we had a little leftover and my paycheck was about to hit, we’d throw a few hundred extra dollars at the mortgage, too. The result was that we didn’t feel deprived — because, remember, we had been somehow managing our apartment rent before. But our house is now paid off in full in only 3 years.
Now that our mortgage is paid off, we are hiding money for a new adventure: adoption of a baby! Immediately folding our past mortgage allocation into the save-for-baby account has been a really gratifying step forward in our savings journey.
This is, I admit, a flashy way to explain a not-so-flashy principle. However, we have to pay attention to those moments. No matter how cash-strapped you are, you will eventually face a tiny increase in income, be it a raise or a side hustle, or a tiny reduction in expenses. In that moment, you can either grow comfortable with the new roominess in the budget (a totally fair choice after scrimping a lot!) or you can try my hack, and hide the money from yourself. You are smart and capable and can make that choice for your own circumstances, but I can definitely vouch for how great it has been to hide money from myself and reap the rewards.
Laura Marie is a writer and teacher in Ohio.
Image via Unsplash