At dinner the other night, T.S. told me about a new trick she’s developed to force herself to save money. It used to be that she’d just spend whatever she had in her checkbook. She didn’t spend more than that, so she wasn’t accumulating debt. But like many people, she wasn’t saving either. She spent whatever she had on hand.
Because T.S. wants to save, she’s opened an account at ING Direct. She wants to build a balance so that she can earn interest.
But in order to save, she needs to stop spending. Over the past few months, she’s developed a system that let’s her do that. Here’s how it works:
- When T.S. gets her first paycheck every month, she deposits it into her checking account. She uses this money to pay bills and to fund her lifestyle, as normal.
- When she gets her second paycheck, she does the same thing.
- At the end of the month, just before she receives her next paycheck, she sweeps whatever remains in her checkbook into her savings account.
“I make myself feel like I’m living paycheck-to-paycheck,” T.S. told me. “If I move the money over to savings, I almost forget that I have it. I know it’s there in the back of my head, but it’s not in my checkbook ready to be spent.”
This monthly checkbook sweep might seem too simple to some readers, and it might never work for others. But for T.S., it’s one way to meet her goals.
Because each of has different goals and different mindsets, we each have different approaches to money management. We develop our own tricks — or money hacks — to circumvent our personal weaknesses. The important thing is to keep trying new methods until you find a few that work for you.
Checkbook register photo by lemonjenny.
This article is about Budgeting, Hints and Tips, Money Hacks, Real-Life
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Just reading back over the comments and I’m surprised a lot of people seem to be arguing the value of “sweeping.”
It doesn’t have to be your ONLY method of savings (for us, it’s tertiary… first, TSP contributions come out of the paycheck, then I deposit 800 monthly into savings, thirdly, I do a “sweep” at the end of the month).
It can be a valuable tool to add to your “bag of tricks”!
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Another thing you can do is just have a certain amount auto-deposited into your savings so you really never see it, never have to think about it, and never have to actively move it. It would be easier that way it seems.
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I’m a big fan of the sweep, although I call it “paying myself last”. To clarify – this is not the only way I save. I also pay myself first.
I always zero out my account immediately after I get paid. I think it’s crucial for budgeting.
If you don’t zero out your account, you’re essentially living on more than one paycheck at a time, which may not be sustainable.
By paying myself last (in addition to first, of course) I’ve also managed to really start chipping away at my debt.
I don’t understand the negative response for this. I think it only makes sense to take a two-headed approach to savings.
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Another similar idea which I use is to have an automatic withdrawal from checking into savings on the day I get my paycheck. Some of this money is savings and part is “escrow” for big expenses that come up periodically, but not regularly, such as insurance payments. That way I don’t miss the money — it is almost like it was never there, but I keep saving for my goals and don’t get stuck one month having spent too much and not having enough for the big payment coming due on car insurance, or something like that.
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I can absolutely NOT trust myself to do this. I have the savings portion of my pay auto-deposited into my ING account. Everything left in the checking account is for expenses or play money.
It is way easier than “sweeping” money, and I don’t have to have the self-discipline to log onto the computer to do it.
(And with kids, house, job, spouse and dogs to care for, the more I have automated the better.)
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I think this is a great way to begin developing the habit of saving. I have done this myself, but with a twist. I keep a “pad” of money in my checking account that doesn’t show up in my main ledger. (I’m not earning interest on it, but it’s worth it to me to know, if I forgot to enter an expense, I’m not actually going to overdraft.) I would “sweep” the money at the end of the paycheck into that “pad,” and do a transfer to an interest-earning savings account when I had $100 or more built up above my preferred “pad” amount.
One of the things that has made saving easier for me is to use a digital checkbook. I have a checkbook program on my Palm (yes, I’m still using a Palm TX)that lets me set up recurring transactions and multiple accounts. I have all my standard bills set up as recurring transactions, and my savings entries. The program also keeps a running total of my ledgers so I always know how much money I have left.
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I pay myself first and last. My 401(k) gets pulled before my check gets deposited, then I get the remainder deposited into two checking accounts (one at ING, and one elsewhere). THEN I have an automatic withdrawl from both checking accounts into savings (part is earmarked for my insurance payment every six months, the other is general savings).
With the remainder, I use the ING account to do automatic bill pay, since it earns a better interest rate then my other account, I can just leave the money in there and forget about it for two weeks. I overbudget for my bills (just in case, you never know when you may get hit with an unexpected higher electricity bill or something), then when I get paid again I sweep whatever’s over my allotment amount to savings.
The other checking account is for irregular expenses and spending money. I only have a couple hundred deposited into that account each check and live off of it. When I get paid again, anything over $300 gets transfered to ING.
Since I have both the checking and the savings at ING, I’m pretty comfortable with the low balance in my regular checking. If something were to happen, I could transfer money from savings to Electric Orange and use it immediately.
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I have started doing basically the same thing. MN Scout mentioned waiting until next check so as to avoid possible overdraft issues. We keep about $500 extra in checking that we don’t show in the register. We know it is there and we add it in every time we balance the checkbook. It is somewhat like a personal overdraft protection. That way I can always feel comfortable spending it down to zero because I know I have a cushion in case I made a mistake in addition or subtraction.
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Like others, I use a combination of the paying myself method. I have a set amount transferred on the days I get paid to my ING account. I have a set amount that I pay on my debt each month as well. Whatever I have leftover at the end of the pay period, I sweep to my debt.
I also have a zero-sum budget, but if I don’t spend all the money allocated for a particular item (such as food), I do not go out and spend the rest of the money on food just because that was it was budgeted for. I look at it as being — what do I do with the leftover money from my budget that I didn’t spend? For me, I sweep it towards my debt.
Someone said that it’s not a very efficient method of saving since it can only a few dollars each month. It’s really to each their own for a system that works for you. I belong to the “keep the change” program. Although I only save pennies any given day, in 2008, I saved over $220. Is it a lot of money? No. But it’s a pretty decent chuck of change that I never missed during the year.
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Bachelor,
The reason you probably don’t have any unexpected expenses is because you are a bachelor. When you have a family, there are all sorts of unexpected expenses, trust me.
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I actually do this with BOTH paychecks for the month. When the first comes, a large portion of it goes to my rent (ugh), and so I pay my bills like normal. When the second comes, I just replace the balance line on my Xpenser spreadsheet with $0 and pretend like I’m broke, then write in the income from the second paycheck. I don’t have an outside account yet, but I do end up with a ton of money saved.
Also, Crystal, I’m a Bachelorette, and I understand the concept of unexpected bills; just because a person’s single doesn’t mean they don’t have emergencies
It sounds like Bachelor is just a control freak when it comes to his money – something perhaps some of the rest of us should try 
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I’ve been thinking of doing this. It was something that I came up with after reading many entries of “getrichslowly” and No credit Needed. Since I have debt, I’m taking the remainder at the end of the month and putting it toward my debt as an additional payment.
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I budget with round numbers. When I enter my paychecks into my personal finance software (I use NeoBudget – its AWESOME), I round down to the nearest dollar. Then, when I spend money out of any budget category, I round up to the nearest dollar.
In my check register, however, I use real dollars. I balance my checkbook once a week when I have some time to do the math. When the next paycheck comes, I sweep the difference between my check register and NeoBudget’s register into my ING account. Its kind of like do-it-yourself Keep the Change.
I’ve only been doing this since November, but its been an extra $25-30. Its nice to put the extra found money on top of my regular contributions to savings. I don’t miss it during the weeks between paydays (I get paid biweekly), and I have never pulled my check register to see how much money I have – I check NeoBudget to see how much I have available in whatever category I’m going to spend in.
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I’ve been doing this for a while. My pay from work gets automatically deposited into my daily transaction account, which I use to save with, and just before each pay day, I dump the left over in my ING savings account.
Now that my emergency fund is sufficiently healthy, I push the left overs into my single remaining debt, which is my car loan.
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I know everyone has their own little tricks, but it seems like a dumb idea to me. How much money are you going to lose due to overdrafts?
I love how ideas or suggestions inevitably get hit with “but overdraft fees!”
My suggestion is “don’t spend money that you’ve already paid out” or “try not write checks very often because they take a while to be cashed and you might forget that something is going through” or “spend thirty seconds looking at your bank account online once a day or every other day in order to catch stupid mistakes like that.”
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Hi J.D.
This is certainly better than not saving at all. I think for those who are not accustomed to maintaining a savings account, this would be a good springboard into paying themselves first (which is what I do). Maybe once new savers start to see their accounts grow, and the affect of larger balances on interest earned, they will be more motivated to start trimming from their lifestyle to spend their first few bucks on their savings account as their first expenditures in addition to sweeping their checkbook balance at the end of the month.
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I do the same thing, and it works great for me! I pay my savings at the beginning of each pay period. Then I pay my bills and spend in a smart way, which means I usually have a remainder at the end of each pay period. I then take a bit of it for fun money and sweep the rest to savings. Obviously, it’s critical to pay attention to your balances, which I do with a quick visit to my online account each day.
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I do a similar thing, except I use $1000 as my zero-point in my checking account. I also have an automatic weekly transfer from checking to savings. I’m saving a good portion of my money, and I don’t stress about it!
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pushing end of month money out of checking is a trick I’ve been doing forever! It is a great way to make sure you don’t spend your savings. I try to keep my checkbook at a very minimum balance ($100) so I don’t lose out on any iterest.
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I’m pretty excited about this. We contribute about 25% of take home pay to investments, but this is a way I can pay our last car payment down. We were planning on paying it off early anyhow, but I think I figured out that it’ll now be 3 months earlier than my initial 9 month earlier estimate. Pretty cool. We used to just leave that money in checking and then it would eventually get spent on something. Now we’ll have to move that money from savings making me wonder if we really need it. Interesting. Thanks.
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