For many people, the hardest part of saving money is making the decision to go without something they want right now. In a study by the Brookings Institution, findings showed that Americans are largely living paycheck-to-paycheck. Surprisingly, sixty-six percent of Americans who are living paycheck-to-paycheck are considered middle class. The team involved in the study suggested that these people have a harder time weathering income shocks, such as illness or unexpected unemployment.
If you are one of these sixty-six percent, or if you feel you should do more to save money, there are some simple things you can do now to avoid the stress that comes with unexpected expenses. One way to make saving easier is to set up savings accounts and automatic transfers to save for these types of bills.
I had a coworker who recently did this and expressed how good it felt to be prepared and have the money when it was needed. “In the past when these kinds of bills came up, it caused a lot of stress because I had to figure out where to get the money, or it triggered austerity measures for the next month or two,” he said. “This time, paying the bills was a totally different experience because I had money set aside.”
You can do the same thing, or something similar. Here’s how:
First, consider a way you can cut back on your expenses so you can set up an automatic transfer to save a little each month for unexpected expenses. For example, if eating out costs your family $40, and eating in costs your family $20, you can eat out one less time per month, saving $20. Decide where you’ll cut back now, instead of on Thursday night at 6:00 p.m., when you might be more likely to spend more money on dinner.
Next, set up a recurring, automatic transfer. You may be more likely to save money if you set up an automatic transfer out of your main account into your medical expense, car repair or house repair fund now (just make sure you set the date for the transfer to occur after you are paid). For example, if you are paid twice a month, you could set up two $10 transfers to come out the day after each of your paychecks come in.
Check with your financial institution, as it may be easy to set up a free online savings account to designate as your “car repair fund” or other. If you haven’t used your bank’s or credit union’s transfer or bill pay service before, learn how. The time you spend now will likely save you some time later on. I have found that most I have seen are easy to use.
That’s it! You did the hardest part when it comes to saving—making the decisions about what you’ll go without and when you’ll go without it. You might be less tempted to eat out if you already moved the money to cover your future expenses. And in just five months you’ll have $100 in your account, which might relieve a little stress when your car battery dies.
The minimal effort it takes to do these things will pay off—not just financially, but physically and mentally as well. You will have greater peace of mind and a greater sense of financial security, which will lend to an overall feeling of well-being and an improved quality of life. Sometimes small things pay big dividends.
Kerry Robinson has been at Bank of American Fork for 20 years, where she manages Bank of American Fork’s southern region, along with the day-to-day operations at its Orem branch. She loves that her customers have become her friends. Kerry loves to run five miles each day at 5:00 a.m.—unless it’s below 15 degrees.