In Tuesday’s post, I did some fuzzy math to find out how much home I can afford. While I found the math to be a little troubling, it’s worth noting that I came into the equation with some predetermined facts and figures.
One of those numbers was a down payment of $22,000. This number was an estimate of how much someone in my bracket might have in the bank. If you’re loaded down with loans, debt, or other expenses, it may not be true for you. The number was determined after asking a few friends and colleagues what they had in the bank, so it’s not exactly what I have saved up either, but I think it’s a nice number.
How can you save $20,000? Not overnight. Forget what years of Brady Bunch reruns have taught you; sit-coms lie. Barely-employed waitresses don’t own 3-bedroom Greenwich Village apartments and when you decide you need $20k, it’s pretty unlikely that a contest will be announced with a grand prize of $20,000 rewarding whatever amazing talent it is you have. Plus, even if the Bradys were right, there’s 8 of them! That’s $20k split 8 ways. Nice try, TV.
I built up my savings the only way I know how: by keeping money out of my own pocket.
I’m in my late 20’s. I live in a great city. I was once a regular in 3 bars/restaurants at the same time. What can I say? I waste a lot of money on food and drink and entertainment. (I like to call it “investing in my community.”) The easiest way for me to restrain myself was to simply put the money where I couldn’t spend it.
Here’s a few easy steps:
- Carry cash. When you’re handing over $20s, they seem bigger than handing over a card.
- Stop bringing credit cards everywhere. When you run out of $20s, don’t have a card waiting in your pocket!
- Head yourself off at the pass. Open a savings account at the bank where you do your checking. Get direct deposit of your paycheck and start an auto-deposit into savings. You can still access the money in your savings, but it’s harder to just spend it. (Make sure you don’t get a debit card or checkbook with that savings account — you want this to be difficult!)
Personally, I started carrying cash last week. So, I’m new to the cash-not-cards game. That said, I find myself spending less money because I can see those little green pieces of Crane stationary as I hand them to a cashier. So hard to say goodbye to a handful of presidents!
As for the direct deposit, I’m in my second year of depositing a portion of my paycheck right into a money market account at Sovereign Bank. I can see it if I log into my account, but I can’t take it out of an ATM and there’s at least a day to transfer. Works if I mess up my week’s spending and have to move money around to pay rent, but keeps me from moving dollars to buy drinks.
I started out saving 20% of my paycheck. When I moved to Boston, I got a raise. I upped my savings to 25%. After the holidays, I decided I could do better. Now I’m putting 30% of my paycheck into my savings.
Yes, it sort of stinks. There are times when all I want is to buy a plane ticket somewhere warm or purchase a killer pair of boots or pick up the tab at happy hour. Those feelings, though, are fleeting. Watching my savings grow seems to hold me over longer — I totally get a self-control high. And I can still buy the boots or the plane ticket or the drinks. Just not all at once. Not all on the same payday.
I’ll keep you posted in the future on how else I’m working to fix my finances.
What do you do to keep your savings, spending, and credit rating in check? I’d love to hear your ideas.