Savings Account Non-Existent? Try a New Approach

Posted by in Articles, personal finance | 21 comments

The Scenario

You opened a savings account months ago, yet the original amount you opened it with is still sitting there. No additional deposits have been made and you’re becoming discouraged staring at the same account balance month after month. Your heart is in the right place and you desperately want to save enough for a small emergency fund, but you know you need a new plan to achieve that goal.


The Problem

Having a goal is a great start, but without a set strategy or plan, that goal just becomes an unrealized dream. One of the biggest challenges to setting aside money for a savings fund is not having a clear view of your budget. Until you know how much you make and how much you spend each month, allocating a set portion of your income for savings is challenging – it’s like trying to dock a boat in thick fog without knowing of the location of the harbor.

  • Goals become dreams – without a concrete plan and strategies in place, goals become dreams. And dreams sometimes don’t materialize.
  • Nothing’s left over at the end of the month - trying to save the money left over at the end of the month makes saving almost impossible. Instead of the extra money ending up in a savings account, it often gets spent on eating out, small purchases, and trivial items – then there’s nothing left to save.
  • I don’t make enough to save – Many people believe they just don’t make enough to save anything. However, if most people tracked their expenses and set a budget, a person can usually find something to save even if it is $25 – $50 a month.

The Solution – How to Save

One solution that I’ve found helpful is including a savings amount in my budget. Working on a set income makes this strategy a piece of cake. However, if you live on an erratic income, this can still be a bit challenging since every month your take-home pay fluctuates. I’ve used two strategies in the past that seem to work well for erratic incomes: auto-debiting a set amount from my paycheck and saving a percentage, like 10%,  of each check I receive (this might work well if  your income comes from various sources).

  • Create a budget -I’ve mentioned this numerous times and am beginning to sound like a broken record. But without a budget, you don’t know how much you could be saving each month.
  • Set aside a portion of your income for savings – You can allocate a percent of your income towards savings or a set amount. Ideally, you should try to save 15% of your income. (Although this percentage is subjective).
  • Auto debit savings from your pay check – If you receive a steady paycheck, set up auto-debiting from your pay check to your savings account. That way you won’t “accidentally” spend the funds on something else.
  • Set aside a percentage from each income source - For those who receive various income sources, allocating a set percent from each source makes savings more attainable. For instance, I often allocate 10% from each income source to savings. As soon as I deposit a check, I transfer 10% of that check amount into savings. It’s takes a little more work since it’s difficult to automate, but it pays off in the end.

These strategies are a good starting point for those that need a concrete plan. Once you realize your savings goal, the more motivated you become.

What savings strategies do you use -percent or set amount? Do you think you save enough?

Be sure to check out my other series posts.

21 Comments

Join the conversation and post a comment.

  1. SillySimple

    I have had good luck setting up two direct deposits one directly into my savings account(if your employer does that). I have my budget and know how much I need to spend–so I have that set amount deposited into checking, the rest goes right into savings so I never see it.

  2. Jennifer Barry

    I agree that almost everyone can save some money. I remember when I had a student loan payment the size of a mortgage, a crappy income and I lived in an expensive city, I still managed to put $25 a paycheck into a retirement fund. Since it was automatically taken out of my paycheck I couldn’t spend it. If you’re employed and you can’t save, that’s a hint that you must radically cut your set expenses every month, starting with housing.

    • Little House

      @Jennifer Barry – I agree. Something needs to change if there isn’t some money going towards a savings account. The first start is to actually have a budget, then figure out how much you want to save.

  3. MoneyCone

    When you get your paycheck, transfer a portion of your paycheck from your checking to savings – you can always move it back to checking if you need to.

    Each time you need to do this, you’ll mentally know how much is being spent and this can act as a barrier to spend less.

    • Little House

      @MoneyCone – That’s a good idea. This is pretty much what I do – I automatically have an amount that transfers from my checking to my savings accounts. One of the savings accounts is for my slush bucket, or money that gets moved around more frequently, while another savings account is for long term savings. So far that has been working. ;)

  4. Ravi Gupta

    Some great strategies. For every check I get I transfer out a set portion. I also do my best to budget what I will spending in the future and while it’s not always correct it’s close.

    -Ravi Gupta

    • Little House

      @Ravi – Sounds sort of like the 10% rule I try and use. It doesn’t always work; sometimes I end up spending the 10% before it hits savings, but it’s just one more way to save money. ;)

  5. Jeff @ Sustainable Life Blog

    This is some great advice little house – for me, a few methods are in place. First, I have my paycheck deposited in my savings, then an auto transfer to my checking account for spending and bill pay. this works great because I’ve gotten a few raises over the last 15 months or so, but the amount going to my checking account has stayed the same – an automatic way to fight lifestyle inflation.
    Once the money is in my checking, there’s 3 savings accounts that it goes to from there, all different from the account that my check is deposited into. I’ve got 4 savings accounts in total, and they all fit into my budget.

    • Little House

      @Jeff – That’s an awesome strategy! I didn’t think to first deposit the check into the savings then auto debit the exact amount you need for bills to your checking. I might have to start using this strategy to ramp up my long term savings. Thanks for sharing! ;)

  6. optionsdude

    Paying yourself like you would any other bill is a wise option. In the past, I have even used different banks so that it wouldn’t be so convenient to transfer money out of savings avoiding temptation. Now that everything is electronic, it doesn’t matter all that much.

    • Little House

      @OptionsDude -One of my savings accounts is an online account and retrieving the money is more difficult – which means I spend that money less often! Automaticity is always a great approach to saving.

  7. Dana

    We have our savings set up automatically – makes it so much easier than having to remember to do something and potentially forgetting to do it. Direct deposit salary, then auto transfer to savings account.

  8. Edwin @ Cash The Checks

    Budgeting is so important because without a budget it becomes hard to increase your savings account.

  9. Little House

    @Dana
    That’s what I’ve started doing as well. It does make it so much easier – and less likely to spend the cash before it hits the savings account! ;)

  10. Jackie

    I would like to save more than we are now. I always try to set aside a portion of our regular income but I also work to find other opportunities to earn a little bit of money thorugh the month and at least 10 percent of the extra income goes into saving. Living within a budget is so important to saving. If we didn’t have our budget I don’t think we would save anything.

  11. Eric

    I like the automated approach. If you can’t handle it manually, let technology to it for you. It takes less time and never forgets!

  12. Hunter

    I really like concrete options for improving ones approach to saving. Having just paid for graduate school I need to refocus on the basics/fundamentals and rebuild for the future. Inspiring post!

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