Apr 12, 2013

Money Saving Trick: PYF

I'm not going to lie, I probably dabble in shopaholic tendencies every now and again. I say dabble because I don't feel the need to buy anything and everything I see and there are times I can walk out of the mall without a single bag; it's rare, but it still happens. I'm a sucker for Michael Kors purses though, they might actually be my kryptonite, but I find that my savings plan actually allows me to splurge/spend more than most would think.

My financial planner as well as my Mom have always told me to remember PYF; Pay yourself first, what this means is you pay your bills, then pay your savings account (yourself), then whatever money you have left over is your spending money for the pay period. In essence, you're treating your savings account like another bill. Set up the auto-transfer function for every month on the same day/days and I promise, you won't even miss it.

Everyone's percentage of what they can save each month will be different, but the average is 10-20% of your net income. I am no financial advisor of any sort, but employing this method has cushioned my savings account quickly and I hardly ever deal with buyer's remorse or those thoughts of, I'll leave the tags on till my next paycheck, that way if I need to return it, I can.

Maybe you're living at home, have a roommate or have found some other way to pay dirt cheap rent, if this is you, try saving 40-50% after your bills are paid. The more money we have lying around, the more apt we are to spend it. It goes back to that old saying, I've got money burning a hole in my pocket. Just because you have the money to spend doesn't meant you should spend it. Want to take a vacation? Allot money to a trip. Want to buy a new car? Put money aside for that. Don't go blow all that extra cash on a bar tab for all your friends at friday night happy hour. They'll love you for it, but you'll be farther off from that shiny new car you want.

Remember when you used to have an allowance? You were given a certain amount of money to complete chores and you could use the money however you wanted, but when it was gone, it was gone. If I'm really trying to pinch my pennies, I resort back to cash. I will figure out exactly what I'll allow myself to spend for a two week period (I get paid every two weeks) and I'll go to the ATM and withdraw the money from my checking account. I can use that money to pay for whatever I want, but when it's gone, it's gone. I don't go back to the bank and pull out more money and I don't start using my debit card to pay for anything. I just simply don't spend anymore money.

I love this trick because I can see my money being spent. I can see how much I have remaining and I can curb my spending according to that. If I get down to $20, but I know everyone is going out to lunch on Friday, guess what? I'm bringing my lunch for two days, so I can go out on Friday with everyone. Otherwise, if that money is gone, I can't go to lunch.

I always make sure my allotted cash isn't my entire stash of "free money". Then, when a new pay period starts, I'll move all the remaining "free money" from the previous period to my savings account. This is almost like giving myself a bonus because not only have I paid myself my normal amount of money for the pay period, but I've also put in extra money.

When it comes to credit cards I rarely use mine outside the confines of having my Sunpass (toll pass here in FL) account auto-debited from my card and my gas. I like to treat my gas as a bill, so it usually goes on my credit card that I pay off each month. The only other times I'll put any purchases on my credit card is when Bank of America sends out those letters saying if you make a certain amount of a particular purchase during a certain time, you'll get a percentage of cash back. I can also "sign up" for these credits in my online banking. Just recently, the offer was to make a purchase of $1-$30 at Starbucks and you'd get 5% back. So, anytime I went to Starbucks during that period of time, I used my credit card. I also make sure to schedule my credit card payments online, so I know I don't have a late payment issue.

Other ways I save:
401k pre-tax percentage of every paycheck
Car Insurance is auto-debited by provider every month, which means no late fees
Car payment is auto-debited by loan company every month, which means no late fees

What savings tactics do you use? Let me know in the comments below.

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