Making saving a habit

[ReadingMama]

We are almost debt-free except for our mortgage.  (We have a few hundred dollars in medical debt.)  We don't use or have credit cards anymore. 

Our cars are paid off, and are both about 10 years old.  Both check engine lights are on, and our AC stopped cooling in the car with the best gas mileage.  So I've been using the lower gas mileage car.  And now it has an oil leak.  (Bah!)  My husband has a work vehicle, so we only use the second car at night and on weekends when we both need to be somewhere.  (He can't use the work vehicle for personal use.)  But both cars have problems now, and since we don't save, we don't have the money to fix either one. 

We had $700 in unexpected vet bills last month, and will need another $160 by the middle of this month for blood work and shots for our dog.  She's always been healthy, but she's almost 10, so we need to start saving for vet bills.   

We moved into a new house in January.  It's new construction.  Our mortgage payment is now almost $200 a month more than our old mortgage payment was.  Our new house is about 15 minutes away from town, so we spend more on gas now too.  And we pay for rural trash pick up. 

We used to have about $75 left over each week ($300 a month) after our expenses were paid.  Now we sometimes run out of money before the end of the week.  We're not used to not having extra money.  So we still eat fast food and get drinks from the gas station, etc.  And we ignore the fact that we don't have any savings until something comes up that makes us have to deal with it.  

We need to start saving.  How do you make it a habit?  Also, what's the benefit of having a cash system? 

[heatherdeg]

If by "cash system" you mean "cash in an envelope", it's ideal for forcing you to stick to a budget.  We remain on an envelope cash system for groceries and dining out.  It's just too easy to go over.

Sit down with your bills (or your online statements if you use a debit card instead of cash a lot) and go through it with a fine tooth comb for the last 6 months.  Figure out where your money is going, and build an initial budget.  If there's money left over, figure out how much it is per month or per paycheck and have it automatically put into a savings account (either split the direct deposit of paycheck if you have dir dep or set up an automatic transfer from your checking to savings account).

When we started, we had cash in envelopes for multiple budget categories.  It was the best way to enforce the budget.  When the money ran out--too bad: you were done.

Sounds like you're living on an extremely tight budget with no emergency fund.  It's a dangerous place to be.  Great that you removed the debt, but hoping you don't wind up back there.

[honeybunmom]

The best way I know of making saving a habit is to save the money before you get it in your hot little hands or your bank account.  My employer allows me to send my send my check to up to 3 or 4 different accounts.  I could choose to send a portion of my check directly to a savings account.  What I actually do, is have it automatically debited from my checking account on the 15th and last day of the month into a money market fund. Of course, it's making nothing, but that is not necessarily the point.  I cannot write a check for under $500 out of this account.  That makes it pretty hard to take money out in dribs and drabs and forces me to be really thoughtful about taking anything out of it.

Good luck!

[HeatherAtHome]

We have it set up so that money is automatically transferred to savings on payday. That's the only, surefire way in my books. The savings account is harder to get into so it's only available for "planned" purchases.

[Ruthiegirl]

The only way that it has worked for me is to have the money automatically withdrawn on payday.  Right now we have an ING account that draws the money every 2 weeks.  When I do my budget, I simply subtract the savings from our paycheck and never think about it. 

[cappuccinosmom]

We just signed the papers for automatic withdrawl on dh's new job.

We know what we can live on per month.  We will stick to that, and everything above that goes into the saving account.  That does two things for us: 1.  It helps us stick to our budget and requires us to think before we spend anything beyond that and 2. It makes the saving much easier.

If, at the end of the month, I were to be faced with writing an $800 check to our savings account, more often than not it would't happen.  However, according to our budget, our day to day expenses can be covered without that.  So every two weeks, $400 will go out of dh's check into the savings acct before we even see it or decide we need it.  It's a mental thing for me, more than anything else.

What you my need to do in order to start saving is sit down with your reciepts and your budget, and really crunch the numbers.  If you are playing catchup perpetually, you won't have the extra money to save.  You need to figure out where you can reduce costs, and what you can put off spending on until you have money saved for it.  It is really important to separate needs from wants, in order to do this. 

[EFmom]

I agree with the pps that direct deposit is the way to save.  If you don't see the money to begin with, you budget around not having it.  It is also helpful for us to have the direct deposit with a bank, credit union or fund that is not too easily accessible, so that we aren't running to pull out cash every time we feel like treating ourselves.

[hopefulfaith]

We save automatically, with direct deposit out of each paycheck.

Also, what really worked for me was opening up a totally separate account at a bank I barely frequent to do that.  All of our 'family' banking is done at Bank A, and I do it all online:  short-term savings, checking, car loan, etc.  However, I don't want our "emergency fund savings" mixed up in everyday money, if that makes sense, and I don't want it to be immediately accessible/visible when dh or I are wishing for something new or I need to figure out how to free up more money for groceries, etc.  I figure these are the times I need to get creative.

So, I opened up a separate account at Bank B and I don't have an ATM card for it - I actually have to drive to the bank and go in in order to withdraw funds.  Consequently, I'm able to maintain a small savings account without it being subject to the temptation of sucking a little bit here and there for everyday stuff.

[mylilmonkeys]

My dh and I are just reading Total Money Makeover and his instructions for saving money fast are to start with looking around and seeing what you could sell.  Do you have any toys you could do without?  Could you do a yard sale, or sell things on ebay.  I just sold a 3-volume book set for $40 on half.com and a collection of magazines for $20 on ebay.  That $$ will go directly into saving.  Reconsider the second car.  It sounds as if you rarely need it, and could possibly make one car work if you get creative with the occasions you do need a second vehicle, like taking one car, dropping off and picking each other up, sharing a ride with someone else, using public transportation, etc.  

The other posters' suggestions are right on the money.  Write out your budget and decide on an amount to save.  If you are buying convenience items like soda, etc, you have money you can save.  I don't do direct deposit into savings.  I have a set amount every pay period to save, and then after I pay bills, I decide how much additional I can afford to put into savings and how much is available for spending (DH has a variable, partial commission income).  The total gets immediately transferred to savings, then this last pay period I had DH withdraw our spending money because I found it was too hard for me to track his debit card purchases or he, mine.  I'm at home most of the time, in a small town with practically nowhere to spend money, so he keeps the spending money and I ask for what I need if I need any, or make my online purchases before telling him what's available to withdraw.  Our system is evolving as we figure out what works best for us, and yours likely will too.  The hardest part was making myself do the budget, but it wasn't as difficult as I'd feared, and is so nice to have now.

[ReadingMama]

Thank you for all your responses.  My husband has direct deposit, but I didn't know it was possible to have it split to go to two separate banks!  I'll look into that. 

I know that we could cut some of our spending.  We get drinks at the gas station and get fast food here and there.  That is definitely where savings can come from. 

Regarding the cars, I think that situation is coming to a head.  Our 9 year old car works fine, but has no air conditioning.  It will cost $1100 to fix the AC.  The mechanic told me the heat will still work, just not the AC.  It has about 130,000 miles on it.  It's the most fuel-efficient of the two. 

Our 10 year old car has AC, but the fan freezes up after about 30 minutes and it has to be turned off for the fan to defrost for 20 minutes before it will work again.  Unless we're going on a summer trip out of town, this isn't a problem.  However, last week the check engine light came on and we started noticing a leak from the front end.  My husband determined that it's transmission fluid, and it has leaked out completely.  We had this same problem in June 2010 (and of course, the warranty on the repair is a 12 month warranty). 

What do you advise about the car situation?  Public transportation isn't an option as we are in a rural area with no bus service. 

[EmsMom]

Originally Posted by ReadingMama 

Thank you for all your responses.  My husband has direct deposit, but I didn't know it was possible to have it split to go to two separate banks!  I'll look into that. 

In this area, some banks give bonuses for opening new accounts.  I got $100 when I opened my checking account.  I have thought about splitting off some of my direct deposit to another bank that is also giving $100 bonus.  In both cases the bonus was for creating a direct deposit.  If you are going to open new accounts, worth checking into.  Both of these accounts were checking accounts, so there was no interest (although the checking account itself was free).  I would move the money into an interest bearing account pretty quickly after getting the bonus.  My online bank made it easy to set up a transfer from any account.  I move all kinds of money around automatically.