When I posted my 2009 goals many of you asked for me to share some of my tips for living on less. In 2009 I hope to write many articles about how we are able to live below our means.
The first tip I have is make it automatic. This can apply to savings as well as debt. While we were paying off our student loans we decided how much extra we could pay every month. Then we set up an automatic withdrawal from our bank to make this payment. If at the end of the month if we had extra money we would put that towards debt payment as well. This system works much better than just telling yourself you will put the extra money towards a payment. For some reason the money is never around at the end of the month.
The same principle works for saving money. We decide how much money we want to save every month and then have that amount automatically deducted from our account. The money is gone before we even know that it has been deposited. Because we never see the money we don’t miss it. Even if you can only afford to save $10 a month automatically have it deposited in a “savings” account. It will grow over time.
We also use this principle when paying for big expenses like vacation or Christmas. At the beginning of the year we decide how much we are going to spend on these items. We then divide that number by 12 and have that amount deposited into a high yeild savings account each month.
Currently, we are finishing up our family vacation. If two months ago we decided to take our family of 8 to Disney World we would have probably gone into debt to pay for the trip. But we have been planning this trip since last January. Every month our vacation money was automatically transferred to another account. A year later we paid for our Disney vacation with cash. Our trip was stress free when it came to money because we knew how much we had to spend.
No matter how big or small your savings goals are, automatic deductions will help you acheive them.