Updated on 01.17.08

Treat It As A Bill: How I Made A Commitment To Saving Work For Me

Trent Hamm

101Not all that long ago, if I wanted to spend money, I’d look at what was left in my checking account and spend it. I knew in the back of my mind that I should be saving some money, but I never looked at it as a requirement at all. It took me a while to grasp the idea of an emergency fund and that saving up for big purchases is a huge money saver.

To a degree, this even continued after my financial meltdown. I focused strongly on debt repayment at first, knocking out my credit card debts, but not really saving anything at all. I still hadn’t really grasped how to make it work for me.

It finally clicked one day when I overheard an elderly neighbor talking about paying her bills on her phone to her niece. She said that she had to write a check to the bank to put into savings, including it as part of her monthly bill routine. It seemed so simple and obvious, yet I had just completely overlooked it. Here’s what I did to get started.

First, I set up a savings account at a different bank than my primary checking account. At the time, I set up a savings account at ING Direct – it was easy to set up and had a good interest rate.

As soon as the account was ready to go, I immediately began to treat deposits there as another regular bill. I paid most of my bills online already with online bill pay, so I just added a regular contribution to the savings account to the pile of bills. I actually set it up so that I made a contribution this way and there were small additional contributions pulled out of my checking account on a weekly basis ($20 a pop).

Treating it as a bill and at least partially making it automatic made it much easier for me to start actually saving money. At that early stage, I didn’t worry about the idea of an emergency fund or a car fund – I just focused on the idea of building up cash in savings so that my future me would have something to fall back on.

As time went on and this became completely routine, I began to refine my strategy, but I still just treat contributions to savings accounts and investments as regular bills.

What’s the net effect? The biggest effect is that I’m not left with all that much money “floating” from paycheck to paycheck. Most of my money is used to pay a bill, whether it’s a “real” bill or just a savings or investment contribution. The second effect is that I know my savings and investments are growing and I know that if something happened now, I would have lots of cash tucked away. This literally makes me sleep better at night knowing things are secure.

If you’re having trouble saving, try setting up an account at a new bank and then putting in a contribution every time you pay the bills – treat thins contribution as another bill. Then, when you’re tempted to spend what’s left in your checking account, that cash won’t be there to tempt you to make bad decisions.

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  1. ClickerTrainer says:

    I have found when my savings get to a certain point, I am very reluctant to part with any amount for any reason. It took so long to build up, and there never seems to be a good enough reason to spend. I had trouble parting with enough for a new roof! So, I’ve divided my savings up into four accounts: “for the house”, “for emergencies and rough patches”, “not for spending”, and “for me”. Having the “not for spending” pile, and the smaller “for me” pile works well for me, and I am sure I will not overspend.

  2. Dan says:

    It’s a great idea that I follow too, even on my budget I have my savings listed as an expense and to me it is, but one that pays off in the end. I do need to work on minimizing that “floating money” you speak of though.

  3. jackie says:

    I am in the process of paying off some old debt. My plan is to take the same amount once the debt is paid off and put it into savings. If I can do it for debt, I can do it for me. thanks for a great post.

  4. Sean says:

    This idea of making savings a bill is an excellent idea, I’m going to put this idea into effect right away! If you think of put that money into your savings account as a required bill that you can’t get out of, then it is a lot harder to justify to yourself why you might need something if you just don’t have the money!

  5. Thats exactly what everyone should do, its a mental thing. If you force yourself into a habit of moving money over to your e-savings, you won’t even think about it any more. You’ll just do it and it feels good when you see your savings increasing every month.

  6. Jake Smith says:

    Great idea Trent!

  7. Jim Lippard says:

    Bank of America now offers a program called “Keep the Change” where every Visa check card purchase gets rounded up to the nearest dollar and the extra “change” is transferred from your checking to savings account–and as an extra bonus, Bank of America will match all of your contributions to savings for the first three months, and 5% of your contributions per month thereafter. Not a bad way to build your savings. (Of course, they don’t offer a savings interest rate that matches HSBC Direct, ING Direct, or T-bills.)

  8. guinness416 says:

    Yeah, we’ve done this for quite a while too, and it works a treat. The “different bank” is key – otherwise it’s too easy to “lend” your chequing account money when it seems to need it.

  9. Rebekah says:

    I lucked out: last summer, my bank offered a VERY good Roth IRA rate. What I do when I get my paycheck is to write my deposit tickets; one is always $XX, for savings. Every month, 4(times)$XX is taken right from my account and goes into the Roth. The rate is 15 times what my savings account was. I never see the money because I deposit it as soon as I get my check.

    (When I get home from the bank, I pay my bills online from the deposited money. No postage. Even one-time bills, like a copay for lab work, are paid online so that I can track them faster. When I’m done, I see what’s cleared; my account is balanced within $2 that I can’t figure out – but it’s pretty close.)

  10. bluntmoney says:

    I do exactly the same thing: on the 15th of every month, I have a little transfer-fest transferring money to our various savings accounts.

  11. Mark A says:

    Excellent post, I have my employer deposit 10% from my paycheck into a savings account for this very purpose.

    This does give me some ideas for my own article along these lines though.

  12. Callum says:

    George S. Clason – The Richest Man in Babylon says your investment should be the first payment you make each month. First you save, then you spend.

    I have a friend who has his company send about 40% of his salary (he’s making more than he needs) directly to his savings account which is very difficult for him to get at. Works wonders.

  13. Mardee says:

    I’ve been doing this for awhile now. I have my credit union account, which is where my paycheck is directly deposited. I keep enough money in there to pay for my mortgage, student loans, utilities and other monthly non-discretional bills.

    However, everything else is transferred periodically into my ING accounts – I have a basic Electric Orange checking account, which goes to discretional bills like credit cards, etc. I also have money going into a regular savings account for emergency use, etc., and a second vacation/fun-money savings account with automatic transfers going into each every paycheck. Once I get my last credit card paid off in the next few months, I’m opening up a third savings account for the new furnace I know I’m going to need in a few years.

    I already have 25% of my net pay taken directly from my check and put into both a 401(k) and a Roth IRA, so I don’t have to worry about retirement money. This works really well for me, and I love the fact that I can go into ING at any time and control all of my accounts.

  14. This is great, and I agree that it works very well. I use the same principle to save for coming expenses: While we pay my daughter’s tuition twice a year, I’ve divided the annual amount by 12 and count that as a monthly bill that I transfer into savings. Same for other expenses like her summer camp, holidays and housing expenses. I’ve been doing this for six months or a year, and when the bill comes, I’m still pleasantly surprised that I already have money set aside for it.

  15. glblguy says:

    Great article and a really great idea for creative ideas around savings.

    I make mine automatic, and weekly. I set up an ING Direct account, and just have money transferred every Monday. I did it weekly so the amount didn’t look so large and to be honest, I don’t even notice it. It’s really great to look at my ING Account once a month when I do my net income statement, and see it growing.

    I also use the automated deposit for end of year property taxes, and a Christmas fund. Just pull a fixed amount out monthly, and budget it as you say, like a bill.

  16. Moneymonk says:

    I did this also, I treat my daughter education fund as a bill

  17. Russ says:

    Something I find useful, contrary to expectations, is to maintain a checking account with a poor interest rate (0.1%). Every month, the day before my paycheck is credited, I move my ‘floating’ balance to a high-interest savings account. It’s easy to do this because I can tell myself the money is going from a 0.1% rate to a 5% rate – but once the floating balance has gone, I tend not to think about it any more. Out of sight, out of mind. If the money stayed in my checking account, for which I have a checkbook and ATM card, somehow I am far more likely to find a way to spend it. Therefore having a good reason to move money out helps me in the long run.

  18. glblguy says:

    @Russ – Russ, I do the same exact thing. Great way to keep from spending and to save.

  19. Jen says:

    Lol, I wish I had a “floating” balance every month. I’m working on it!

  20. Barb says:

    I love these ideas. I bought my roommates Jeep from her with no interest. I have that pmnt taken out of my check twice a month and put into my Christmas club at my credit union. Can’t touch the money until October and I earn a bit of interest over the long haul. I transfer the money in October to a 6 month CD and make her some interest too. Keeps me from making loans to myself!

  21. I couldn’t agree more…treating your savings as a bill really helps.

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