Money Hack: When You Save Money, Actually Put It in Savings
Published on - June 1st, 2010 (by J.D. Roth) As part of the publicity push for Your Money: The Missing Manual, I’ve been a guest on a couple dozen radio shows around the country. This morning, for example, I spent an hour chatting with Joy Cardin of Wisconsin Public Radio.
I was nervous about these appearances at first — I’m a hesitant public speaker, as I’ve said — but after the first few, I got the hang of it. Now I actually think they’re fun. Plus, I get a kick out of talking with callers, trying to help them with their financial problems.
On the Joy Cardin Show today, the callers were great — full of smart ideas for working with money.
Denise, for example, shared a little money hack that I really like. Whenever she goes shopping, she takes any savings and pays it to herself. For example, if she buys groceries and uses coupons and sale items, she’ll take the “you saved $10.73″ (or whatever the amount is) from the bottom of the receipt, and pay that much from checking to savings.
This is the sort of money hack you can use on everything you purchase. If you’re shopping for a new mattress and manage to save $100 by haggling with the furniture store, you could pay that extra $100 into savings. (And if you combine this with targeted savings accounts, you could choose what you’re going to use this savings toward: your emergency fund, your self-insurance fund, or something fun like travel.)
As I say, I love to hear the little games people play to make themselves get out of debt and save money. I haven’t decided if I’ll do a second book yet, but if I do, a short volume of money hacks sure would be fun, don’t you think?
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What a great idea, J.D.
While to some, these money-hack concepts may seem very minute financially, but those small dollars add up. So while we’re “saving” why not truly save our “savings” by placing them is a designated account.
It takes plenty of time and patience, but before you know it, all of those dollars and cents have been saved up to give you a push towards following your dreams!
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I would steer clear of a money-hacks book. It’s too easy to get drawn into making lame lists like “20 Money-Saving Ways to Reuse Old Pantyhose”
It’s not that any given tip isn’t useful, it’s just that there are so few tips that apply to any one reader that most of the book would be next to useless.
(My 2 cents about top-10/20/50 money hack list posts.
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What we do is take any money we are tempted to spend, and if we make the wise choice, we automatically pay that amount to our credit card with the highest interest.
So, if we are tempted to eat out and we decide not to, we will set up a $10-$20 payment immediately. It really helps us to be honest with ourselves when we claim we can’t find money to pay down debt, but we “magically” find it to splurge on something.
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I think there are two kinds of hacks for saving money. One is the psychological kind where you trick yourself into thinking you have less to spend or otherwise making it less convenient to spend. This is an example of that. So is sending money into savings with every paycheck. So is turning money into savings bonds. So is putting money into different spending categories.
The other kind is ways to actually spend less without reducing your happiness (or without reducing your happiness nearly as much as using the extra money otherwise will increase it). The 50% solution is an example of that, as well as sales, buying used, borrowing, using coupons and coupon codes, and making things last longer.
The first kind doesn’t really help me because I don’t really understand it. I could transfer any amount into savings but what happens when I run out of money before I run out of month? Do I just do without (much less fun than the second kind of hack)? Or do I take the money back out of savings (or charge it–same difference)?
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No wonder holds on your book in SE Wisconsin jumped today! I’m a librarian and I’ve been waiting for the library system to order your book. I checked the title today and thought, How come so many people in my area know about J.D.? So far there are only two copies in a system of 52 libraries but I’m sure there will be more ordered!
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This is a great tactic – and even better is to shunt it into a designated account and then, whenever the account accumulates a certain amount, invest it.
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I think a money hacks book would be great! Knowing you, I think you could pull it off and make it something unique and new.
One suggestion would be to incorporate cutting edge research in neurosciences and money and use that research to develop the hacks. I haven’t really seen a personal finacne book take that route, but I think it would be a great book.
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I love this idea, and wrote about it myself (though I called it “Bank It”!). I saved several hundred dollars by doing this!
The only issue is that I can stretch the life out of my budget, and if I actually put that money into savings, perhaps there is an opportunity lost at purchasing something for future use at a severe discount (thereby costing me more in the future). But overall, I think it is a very effective concept:).
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I think there’s room somewhere to have a whole discussion about what “savings” even means. Retirement savings pretty much always counts as savings. What about saving for a house? Everyone generally would count it, but what about when you go ahead and buy the house? Did you just un-save that money? What does that count as? What if today I create a “Super-sized big mac meal targeted savings account” and put $50 into it, then proceed to withdraw from it at $5/day for the next ten days as I buy lunch? Can I really say I “saved” $50 this month? What if I put my paycheck directly into my savings account, and then withdraw from targeted sub-accounts for all my regular expenses? Does that count as saving?
“Savings” and differential net worth seem synonymous to me, but people seem to count anything as “savings” simply by labeling it as such. i’m not sure that means anything. Sure, this discussion may be largely semantic, but I think it’s interesting.
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I went through a period of time where for every $1 i spent i had to put away .25 for savings. It was fun in the beginning but then became hard work because i didn’t want to spend money so i didn’t have to ‘pay the piper’, even if the ‘piper’ was me…Now i am so good at not spending money that my savings jar is always empty.
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Hmm, I’m skeptical about this idea for me for the following reason. By constantly “saving” money on things like groceries and buying pants on sale, the sale prices have become my de facto budget to the point that I no longer ever pay “full price” for much of anything.
I guess mentally I’m already “saving” that money into an account, and using it in the near term for other things, or putting it into my actual savings account at the end of each week (when I deposit my unused weekly cash allowance).
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I’m about to “save” a lot of money by downloading Kindle PC and buying future reads in e-format instead of hardcovers … but I can guarantee I will be spending the difference on more books.
I think the way to make this particular hack fun is to use targeted accounts (or Mason jars). For example, if you save $10 at the grocery store, put $10 in a “gourmet fund” for the day when you absolutely, positively, have to have pecorino instead of parmesan.
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I already scrape everything left in my chequing account into savings at the end of the month, so I really don’t see this hack having an effect. Like Debbie, I put more value on hacks that actually decrease my spending–shopping sales sort of qualifies but I wouldn’t really count it as a hack. And transferring money earlier in the month won’t have any net effect.
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I used to do this for a short while until my boyfriend took over the grocery bill. Now I just apply that difference to the mortgage payment or another loan or invest it. While I was doing it, I kept a spreadsheet where I tracked the overall cost, how much I saved by percent and amount, and whether I transferred it to pay off my notes. I wanted to see how much I could have spent and how much I actually saved in a year. I guess you can almost say it’s a hybrid of the money hack and the debt snowball. I still clip coupons for my boyfriend atleast.
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I think this is a great idea, and it’s one of those simple things that actually works and actually makes a difference. I for one think a money hacks book would be pretty awesome.
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I rather put my money into stocks instead of savings
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It’s a neat idea, especially for those working hard to pay down debt. I think I’d find it more trouble than I need.
What I do like, however, is a suggestion from the comments. I do notice that when I have more money sitting in checking than I need, I can justify splurges more easily. I just transferred $1k to my ING account so that it’s harder to access.
In response to Tyler, I consider savings as “money I didn’t need for immediate expenses.” I don’t bother with targeted savings accounts and all that jazz. I do have a tolerance level — right now, I’m working toward $10k in savings. Once I have that, I’ll be able to spend what I bank above that on something splurging, like a vacation. Yes, I suppose I “unsave” that money when I spend it, but why else should I bank up money than to spend it at a later date? So, for me, savings doesn’t need a goal but it does need to be money that wasn’t used in the months close to when I earned it and was therefore saved for later enjoyment.
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If you like this money hack, then check out piggymojo.com. It greatly facilitates this kinda thing.
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I agree with Tyler @ #9 in that there’s definitely a semantic divide between what people class as ‘savings’.
When you reduce your shopping bill through coupons etc. you’re not technically ‘saving’ anything, you’re just spending less compared to a model basket of shopping purchased at a store without said coupons.
Choosing to put the money not spent (the ‘saving’) into a savings account does, however, make it a concrete saving and is a good idea.
This is not the same as someone who ‘saves’ $10 on their shopping and so treats themselves to a $10 book, as you’ve spent the same (except you now have a book that you probably didn’t need!)
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I would consider ‘saving’ to mean that its use is delayed until a much later date (i.e. for retirement) or to be kept as capital for self-insurance, etc.
What I do to help fund retirement accounts:
We have a large no. of bills that are paid annually or quarterly. Examples include property taxes, elem. and H.S. tuition, water bill, auto insurance, life ins., auto registration, homeowners ass’n., etc.
I use targeted ING savings accounts and each month I deposit 1/12 of the annual and quarterly bills (i.e. the sewer bill is paid annually in Feb. and totals $360, so I save $30/mo.). When we receive the bill, I try to pay it without touching the targeted savings accounts. If we can cover it, I redirect that amount of savings into the long-term savings fund.
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Apparently Hollies think alike. I do the same as @Holly, because I am bad at follow-through with the “putting it into savings” for small, frequent transactions.
My husband and I have a dependent care savings account. We pay childcare out of our checking account, and the money in the dependent care savings account goes directly into 529 accounts for the kids.
We saved enough to pay cash for kitchen renovations. When the bills came, I paid out of our checking account. I only took enough money of the kitchen renovation account to keep from overdrawing our checking account. Using this method, we were able to spend just 70% of the kitchen fund money, and will put the unspent 30% back into long term savings.
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I budget every month down to the last dollar. If I don’t spend all my allotted grocery money, clothing money, or fun money, I just transfer the remainder over to my high-interest savings account on the day I get paid. That way my account is never at 0$ but I’m starting the month fresh with a full paycheck and still saving extra if I have it.
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I don’t see money saved when shopping…you simply didn’t spend as much as you could have.
I’m naturally frugal, so it seems counterproductive to pay myself for not spending…I “not spend” all the time, lol…I don’t have enough money to pay myself for all the money I didn’t spend. I’m not sure if I’m making sense, but my point is that I don’t splurge often…all of those things I passed up would add up to a lot more than I have.
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My gas budget has been $50/week. We bought bikes. Whatever savings we get on gas goes to an account for the bikes to “pay for themselves”. After we’ve gotten our money’s worth out of the bikes, we are going to keep saving the same amount to upgrade our bikes!!
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I think tricking our minds on the little things helps a lot. My moneyhack – I try to use cash as often as possible and I never give exact change. Whatever change comes back to me goes into a large jar. After a year or so I cash it in and use it for vacation spending money or something fun. It has also gotten me out of a car repair jam when times were tough.
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That is a clever little hack that Denise uses! Thanks for sharing. In the mean time, I’ll be looking forward to that book.
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I love the $ hack idea. My tip? I bent all of our credit cards so that they cannot be ‘swiped’-I actually have to give the card to the cashier to manually type it in. Its a hassle for everybody-myself included-so eventually I just stopped using them
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One Savings Hack I use, is when I travel for work, I have to front cash expenses (cab rides,etc). Then, when I am reimbursed, I put that into savings, as I haven’t really missed it.
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This post reminds me of just how much of our financial lives are more than just about money, but also about psychology. If we were all truly only rational and mathematical about things, we would all end up being millionaires. On the other hand, since we are emotional irrational beings at times, we sometimes need to come up with ways that “trick” us into saving and planning for the future. For some of us it comes easier than others.
My hack? To assign every dollar of income so that it either goes to a saving, spending or giving category – that way there isn’t any money that just disappears because it’s “left over”.
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I just came across your site about 2 weeks ago and was so pleased to hear you on the Joy Cardin show yesterday! You had no reason to be nervous…great chat to listen to. I hope that your message continues to reach more and more people….common sense is the way to go!
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I hate money hacks. If you’re going to save, save. If you’re going to spend, spend. But don’t try to trick yourself into believing that spending is actually saving.
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Reminds me of a vaudeville joke.
Mr. A: “I saved a dollar by walking and
not taking the bus.”
Mr. B: “Gee, you could have saved a lot more
by not taking a taxi.”
(I think I read this in one of Andrew Tobias’s
personal finance books)
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When I was paying down debt I had a similar “money hack”. Whenever I purchased junk food or alcohol I’d put matching funds toward my debt. A dollar here and five dollars there really did add up, and it made me more aware of what I was consuming too. Deciding to order another beer at the bar was less attractive when I knew it would “cost” me $10 instead of $5.
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