Investing Directly in Savings to Get Yourself to Spend Less
You’ve probably heard the phrase ” pay first yourself . “ This is a common method of achieving savings goals: when you get paid, set aside some of your paycheck before doing anything else with it. You can take it a step further by transferring your salary to your savings account.
This strategy is taken from Investing Answers, where writer Brian Reid suggests:
Have two bank accounts with one bank; checking and savings account. Set up accounts so that you can transfer money between two accounts. And here’s what’s important, unlike having your money first deposited on a check, it must be deposited in savings. Transfer only the amount that you have allocated in your budget for review. This way you save by default, and what remains in the savings account can go towards your financial goals.
I like this method because it makes it much easier to pay yourself in the first place . As Reed says, it keeps the default. This is especially useful if your income varies. In the months that you get paid more, you automatically save the “extra” money as it goes directly into your savings account.
You avoid the urge to spend by highlighting only what you have pledged in your checking account. This method, of course, still requires a certain budget, but the point is that you start from the place of the savings.
Check out Reed’s full post for more details.
6 New Behavioral Strategies to Reduce Costs in 2012 | Business Insider Questions Answered