Is budgeting a hassle? Do you sometimes forget to make your Roth IRA contribution or to transfer this month’s installment for the new car you’re saving for? Do you wish there were some way to make the process easier?
One way to reduce human error is to set up a separate savings account for each of your goals. You can then set up automatic monthly transfers to each of these accounts (and to each of your retirement accounts). Though many GRS readers like this sort of automation, there are plenty who don’t. Some are wary of electronic transactions, and others just want to have more direct control over the process.
For these folks, GRS reader Lena has a suggestion. Her entry to the recent GRS video contest describes a great way to pay yourself first with a personalized coupon book:
Here’s how it works: Just as you might have a coupon book listing all of the installments on a loan you owe, you create your own coupon book for each of your financial goals. If you want to make $50 monthly contributions to your Roth IRA, for example, you’d create a coupon book for that, with one coupon for each month. When you do your finances, you pull these booklets out and treat them just as you would any other bill or obligation.
Lena calls this an “easy, low-tech way to help you reach your financial goals.” I agree. It can be tough sometimes to pay yourself first because you don’t have any physical reminders. This is a convenient (and fun) way to make saving a habit.
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Very clever Lena! Thanks.
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It might also add to the fun if you added a visual element to the coupon to show your progress. For example, print out a normal letter sized sheet of paper where the left half is a stack of the coupons for your IRA for the year and the right half is a Matisse you really enjoy looking at. As you pay off your contributions you get to watch your favorite painting grow.
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Wow, what a great idea! This has so many potential applications. For example, finances can get pretty complicated for elderly people — multiple accounts with different features/restrictions, the need to frequently transfer balances, etc. This would make it as simple as just paying your bills as they come in!
Also, this would be wonderful for someone that doesn’t like managing their finances by looking at a big ugly spreadsheet. Spreadsheet budgets can get pretty hairy if you need to account for different events in given months.
Thanks for the tip!!
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Interesting idea if you are not disciplined enough or do not like using direct transfers. Seems like it would take quite of bit of extra time though. For me, I would not want all that extra paper lying around. I get enough mail as it is!
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Sometimes a visual reminder is essential for success (think postcard of France on the desk or swimsuit photo on fridge). This is a great idea.
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I really like this idea! I think I would benefit from doing this, as I am a procrastinator when it comes to paying myself.
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I have a little card taped to my computer monitor with instructions what to do with monthly paychecks – how much to put in checkings to maintain my minimum comfort balance of $1k, what bills to pay when, where to put the excess cash-ola (savings accounts etc). If you lack the discipline to control spending you can reverse the order “to pay yourself 1st”.
In addition I have a forecasting spreadsheet that forecasts my assets, cash and liabilities for the next 2 years allowing me to make planning decisions which in turn inform where I save my money (savings vs. retirement vs. accelerated mortgage etc).
The card took me 5 minutes to make, the excel spreadsheet grew over a decade.
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I suppose this is a reasonably good way to push yourself towards saving, but for me the more difficult part is figuring out where the savings should go. Ordinary savings account? Stocks? Bonds? Prosper? Once I have that figured out, I don’t really need to play a game to help myself direct money there.
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Great idea but it seems to be a waste of paper. Personally, I’d like to have as little paper around as possible. I have used my calendar in Hotmail or Outlook to set up reminders each month to transfer $.
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Hmm, I just set up my Quicken account to have my checkbook fill in the anticipated bills and transfers (Control J in quicken). I try to maintain 2 months ahead in the program so I can see the pending items including money going into checking also. If there are any changes one can adjust their checkbook in advance.
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I can see where this would be a great teaching tool for kids, especially teenagers with a first job. I wish I had learned to pay myself first then. Since I have learned it I have made great financial progress. I can also see it as a low tech tool for everybody who just needs a reminder system.
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@#10. almost there: I do the same thing in my quicken. I started doing this when I was paying off all of my credit and car loans. Now I have several different ING accounts set up with what I’m saving for. I have a regular emergency/cash reserve account where the bulk of my savings goes. I also put $25-$50 into a Holiday account and $300 into a future new car fund. By figuring out what is coming in and out in advance you can see where you can be in 3-6 months by following your plan. This is incentive enough for me to save the extra money I have since becoming debt free except the house. I do admit sometimes a want comes up or the “need” to go out of town arises, but after putting myself in a position to pay it with cash, I feel a splurge is occasionally well deserved.
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The combo of smart pig goals and linking them to Mint goals is my favorite way. Dynamic tracking of your goals.
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This sounds like a marvelous idea. Just wait till hubby gets my first BILL….
But in all seriousness, for those that need the extra push this is a good idea. Sometimes seeing things in black and white make them more real and concrete and may push individuals to save harder.
Too bad you can’t go into a bank and open an account, pledge an amount you want to save and have the bank send you a ‘little bill’ each month. I know, I know that would cost too much money to implement into this world, but wouldn’t it be nice all the same.
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This is a great idea! I have most of my stuff on automatic transfer, but for the few things I don’t, I really like this idea. The initial investment of time to make the coupon book is well worth the effort to have a streamlined system. Great thinking! I love the small, simple set-ups!
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How does this provide any improvement over an automatic transfer? It claims to help you “remember,” but still requires attention and human intervention. You would be a lot less likely to miss an automatic transfer run by computers.
This is just a time wasting “make-work” step that could be eliminated and automated.
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This is more visual than the Excel spreadheet I use, so it would be great for everybody who needs physical reminders! I would probably toss the coupon books in a drawer and forget about them, but that’s just because I’m not good with physical stuff laying around the house…I kind of lump it in my mind all as clutter and overlook it…
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I think a lot of the commenters are missing the point…some people just do not trust computers or computer programs to manage their money. They understand cash and coupon books. A lot of older customers at my bank are this way. I can see where this system would come in handy for a lot of people.
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I just found this post thanks to your list in the post about gaming. This is a great idea. I am very wary of electronic debits and transfers and have very little set up to come out of my account automatically. It’s probably my unstable freelance income that worries me, but I like to stay in control and move the money myself.
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