Force Yourself To Save! 15 Painless Ways To Pay Yourself First

by Silicon Valley Blogger on 2007-11-1365

Some painless and effective ways to fool yourself into saving.

Often, we find ourselves wondering how we can put more money in our savings accounts. Why is it that by the end of the month, it just seems like all our money has evaporated into thin air? Sometimes it feels like our expenses, bills and debts are taking over. For some of us, saving can be a chore, or can find itself as a lower priority to all other things that occupy us financially. Anyway, to address these issues, I came up with a few suggestions to try to get ourselves to save more.

Here’s how you can trick yourself into saving money.

Trick Yourself Into Saving More!

#1 Treat yourself like another entity and pay yourself first.
This is one of those classic savings approaches that we can easily employ. If we imagine ourselves as someone as important as any other creditor we have, then we can deploy payments to our own accounts on a regular basis just as we do our own bills. Set up an arbitrary savings amount — a good rule of thumb is at least 10% of earnings — and stash it in a savings account each month. I find 10% a good start to a savings plan but a stretch goal should be something higher, such as 20% or more of your income. Another term for this activity is “tithing yourself” and is a great habit to develop. In the course of doing this, it may become a more automatic procedure as time goes on since you find yourself doing it out of habit.

If you need a little more help with your saving endeavors, you can take a look at a budgeting tool like YNAB (or You Need A Budget). It’s a desktop application that’s proven to help users quickly reduce their debt and get a handle on their spending. Features built into the tool strongly encourage you to pay yourself first. Check out my review of the YNAB personal budget software product.

#2 Take advantage of retirement accounts.
The closest you can get to free money is what you get when you build your savings in tax deductible and/or tax deferred retirement accounts. When these retirement accounts are matched by an employer, such as in the case of a 401K account, it is a huge incentive to participate in such programs. Of course, you may need to weigh your ability to save for retirement against more pressing financial obligations such as paying down “expensive” debts or building up savings for shorter term goals. Early withdrawals from a retirement account can potentially trigger penalties so if you open such an account, make a commitment to give this fund a chance to grow with time.

save money, grow your wealth

#3 Automate your savings.
Direct deposit is one way of ensuring you get your money safely into your account without worry. Without it, I tend to second guess myself wondering if I’ve received all my payroll checks and whether I’ve deposited them all. Direct payroll deductions are a superb way to channel money into savings if you ensure that part of your paycheck is automatically earmarked for a savings account and not your daily expense or checking account.

#4 Make extra mortgage payments.
By accelerating your mortgage payments, perhaps by making an extra payment towards your mortgage, you’re contributing to your equity and thus, your pocketbook. Just another way to help pay down a good debt obligation. Here’s a quick way to see how many years you’ve cut off from your mortgage by making extra principal payments.

#5 Save your windfalls after paying down debt.
If you receive a windfall, pay down your debts first. If you don’t have any debt, save that entire windfall and better yet, invest it. Windfalls have truly helped us make great progress with our savings program so we always take the opportunity to invest any “unexpected” monetary amount (e.g. gift, raise, inheritance, etc) that we are fortunate enough to receive.

#6 Pretend you didn’t get a raise.
So you were lucky enough to secure a raise! Congratulations! Now if you’re able to pretend you never received it and instead sock this additional money away especially in an investment account that compounds with time, you may surprise yourself further down the road with a substantial nest egg. I agree, not being able to celebrate a raise may not be that much fun, so use a small portion of it to reward yourself (but I’d avoid those big ticket items)!

#7 Pretend you haven’t paid down your debt even if you already have.
You may be accustomed to paying down debt, but the time will come when you’ll have paid them all down. When this time comes, you may find yourself with money freed up raring to go elsewhere! This is a great opportunity to route this “newly found” money towards a savings account for your goals.

#8 Bank the savings you receive from coupons, sales and discounts.
Big sales can save you a bundle, so how about writing yourself a check each time you score some savings while shopping? If you were prepared to pay full price but discover a savings of 10%, bank the 10% you save into your savings account. This could be a painless strategy of building up your nest egg that you incorporate into your daily shopping habits.

#9 Open investment accounts and automate contributions.
Learn about how to invest your savings. The next step beyond saving your money is to find a way to make them grow. Once you are comfortable with investments, you can open accounts and actually set up automatic monthly contributions to these accounts. This will help you take advantage of the concept of dollar cost averaging, a powerful way to grow your money.

#10 Create secondary sources of income.
If you are able, exploring other ways to supplement your income should help boost your savings. By increasing your income, but keeping your expenses the same or lower, you have more money freed up to line your accounts. I especially like to hear about how secondary income sources come about by accident, as when someone has a hobby that turns into a business, or when someone fortuitously stumbles into an income generating project they actually enjoy doing.

#11 Cut down on impulse buying and avoid unnecessary purchases.
Just say no to that inner voice in your ear telling you that you can’t live without the attractive XYZ sitting on the retail shelf. If you give yourself a few days to mull over your buying dilemma, you may realize quickly it’s not something you really need and you’ll forget about it in a few days. Get yourself distracted with other matters as much as possible!

#12 Save your extra paycheck.
There are payment schedules that involve getting paid every other week or even weekly. If you get paid on alternate weeks, live on two paychecks a month. If you get weekly paychecks, live on four paychecks a month. You will inadvertently end up getting an extra paycheck in some months and you’ll find yourself saving 10% a year in no time!

#13 Reinvest interest and dividends from investments.
Another painless way to beef up your investments: reinvest any interest and dividends and give your investments a chance to build.

#14 Request for higher income withholding.*
I wouldn’t normally recommend this method of saving, but for some people who have a hard time doing so or are not disciplined enough to save incrementally, this can be a helpful strategy. Have your employer withhold higher amounts for income taxes from your pay check. Though the government has interest free use of your money during the year, the upside is that once you get it back via a tax refund, you can treat it as a windfall to be immediately funneled into your savings account. This strategy may backfire if you are tempted to use that tax refund for things other than debt payments or savings.

#15 Use unconventional savings vehicles.*
Again, this may not be the best way to save but could be the only ways to save for some people or “non-savers” who lack the discipline to set aside money any other way. For instance, if you have insurance policies tied to savings vehicles, you may consider these relatively more complex programs rather than simpler insurance plans, in order to effectively “force” yourself to save. Examples of unconventional savings vehicles include universal or whole life insurance, annuities, or even real estate, which allow you to make monthly payments towards a fund or goal.

The last couple of points marked with *’s are more unconventional and even controversial. I personally would not apply these strategies myself since they are not optimal ways to save money, but for those who have a challenging time with saving on their own volition, these methods may be what it takes to force them into the habit. Whatever works!

Copyright © 2007 The Digerati Life. All Rights Reserved.

{ 40 comments… read them below or add one }

nina November 13, 2007 at 11:18 am

Automatic Transfer (#3)is very effective. Then, forget about it. It’s also good if access to the savings account is difficult.

Smart. Healthy. Rich. November 13, 2007 at 12:35 pm

I’m a big fan of #1 and #3. I’ve got 10% of every paycheck automatically deposited into my high-yield savings account that I use for my emergency fund.

You’ve got to be careful about #4. Depending on your situation (mortgage interest rate, tax rate), not paying off your mortgage early can actually save you money in the long run. If you’re just looking to get rid of that debt, then go for it, but in the long run it could actually work out in your favor to keep the mortgage because of all the tax savings that come with it.

Matt Wolfe November 13, 2007 at 1:11 pm

That’s a really great post. I also use automatic savings plans. Money is automatically deposited in to my savings account weekly. Another idea is to never spend your change. Put it in a bucket and just never touch it. I know this sounds little but it usually accounts for a couple hundred dollars for me at the end of a year. Take that money and throw it in to savings as well.

curiousgeorge November 13, 2007 at 2:04 pm

I tried paying myself first. Lasted about three months until I started getting utility shutoff notices.

The Financial Blogger November 14, 2007 at 4:50 am

I know somebody that opened 2 bank accounts. One for her daily expenses and paycheck deposit. The other one is for all extra sources of income (bonus, tax return, gift, alternative income). Obviously, it is a saving account.

The other easy way is to establish your available monthly cash flow and contract a loan in regards to this amount. Then, you use the money from the loan to buy an assets (it could be an investment loan, a land, a piece of property)… you know what? I think I’ll write more about this technique 😉

Anona November 14, 2007 at 6:56 am

I suggest looking at travel websites and find your dream vacation that is out of your reach — I found myself motivated to pull back on the purse strings just in hopes of affording that trip.

It’s time to leave your job and go Freelance!

Adam November 14, 2007 at 10:21 am

Love suggestion #8. I am really frugal when I help with the grocery shopping, so I like having a place for that extra cash (yes, we use cash) to go.

Great list!

frugal zeitgeist November 14, 2007 at 12:09 pm

Very good tips; my favorite is #4. One year or less till I kill off the mortgage!

david November 14, 2007 at 12:22 pm

Or pretend you are really poor and only buy the things you really need =)! November 14, 2007 at 2:07 pm

I think automatic transfers (especially 401k contributions) are definitely -the- way to pay youreslf first!

Derek November 16, 2007 at 7:39 am

Great tips and great website! Very practical tips on how to save. #3 is my favorite.

You are right about 14 and 15 being controversial. I’m am oponent of someone else collecting interest off my money. At least with a savings account, you can get money out quickly if needed for emergencies.

Mr. Nickle November 16, 2007 at 9:36 am

The tax break on mortgage interest is not really a reason to keep a mortgage. You are only getting back about 30 cents on the dollar. You’re still losing money.

Randy Aldrich November 17, 2007 at 12:24 pm

My wife and I actually just initiated a new plan. We set up a high yield savings account with HSBC (currently 4.75%) and deposit all of our money directly there from our paycheck. every cent.

I get paid bi-weekly, and she gets paid weekly. We have set the HSBC account up to make a automatic transfer every week which amounts to only 80% of our weekly take home pay. In order to get any additional money out of the HSBC account it takes us 3 days or a visit to the bank so we really have to think about it.

The money that is transferred every week, goes into another savings account (much lower interest but readily accessible). We each take our allowance out (in cash) on Sunday/Monday that will last us (gas, food etc) until the next week. Having the cash really forces us to limit the spending because it ‘hurts’. The rest of the money in that savings account is left alone until we need to pay a bill. In which case the exact amount of the bill is transferred into our checking account to pay the bill.

I think we’ve worked out a pretty good maximum savings system. Of course, I haven’t detailed the IRA or 401k contributions here because those are all pre-paycheck.

The great thing about this system is we wont change it, even after raises. Any bonus paycheck or windfall goes into the high yield savings account and doesn’t get touched. A raise simply means the percentage of savings goes up. The amount automatically transferred weekly is not a percentage transfer, it is a static amount.

Free From Broke November 20, 2007 at 9:22 am

Great list of ideas! I think this is a combination of some of your tips – when my wife was on maternity leave we had to budget with my salary and some savings we had). Now that my wife is working again we use the same budget and deposit a good part of her paycheck into an online savings account. Having a little one showed us how much fat we could trim from our budget!

manzoor November 21, 2007 at 4:08 pm

Wow…..this is awsome. I did not realise that it could save until I started saving myself couple of months back. I have a part of my salary deposited into a separate savings account. I say to myself that my salary is only 80% instead of the total 100% I actually get paid for. So every month 20% of my salary goes into my savings and that is it…..and when I see it now, I am quiet surprised that I could ever save this much. Believe me saving 10 to 20 % of your income really helps in a long way. Some times I was tempted to buy something, but I let it go of my mind for a week and rethought about it…..yes it was really a waste of money if I had bought that item now…….

Good one !

JC November 21, 2007 at 7:15 pm

Never use life insurance as a saving vehicle – this is a diabolical ruse. By straight renewable term and invest the difference in a no load or low fee managed mutual fund.

My Dad had a universal policy and to make a long story short when he died my Mom only received the insurance money but not the “savings” account money (They were told both would be paid and trusted the agent instead of doing due diligence). Never borrow against such policy – a virtual guarantee of never seeing on dime of your money. Don’t expect the truth from your agent these policies are goldmines for agents and insurers.

John Jackson November 22, 2007 at 12:45 am

Very informative.

oufan199 November 22, 2007 at 7:33 am

One of my money habits is to “save” two paychecks a year. Since I get paid every two weeks, two months out of the year are months in which I receive three paychecks. However, I budget for only two paychecks every month (it’s easier to figure anyway). Since I’m one who usually goes a bit over budget per month anyway, it’s nice to have that extra “padding.” You’ll still have to budget the payroll taxes, but you should have two net paychecks to “play” with during the year.

frugal duchess November 23, 2007 at 10:01 am

Great post. Number #6 is my favorite.
I like the idea of banking “found money” with a little slice carved out for fun.

Best Wishes,

minimum wage November 25, 2007 at 1:30 pm

If I get a $50/mo raise, and my rent goes up $75/mo, did I get a raise? Can I pretend I didn’t get a raise?

Amanda @ Me vs Debt January 17, 2008 at 5:45 am

Great tips here, SVB… Who is this minimum wage character and why are they such a pessimist?

@ Minimum Wage – Maybe you should pretend that you don’t have a job and go stay in a shelter. Free rent there. By the way if you have access to the internet you have access to the skills you need to get yourself a better job. Instead of spending so much time reading about what you would do if you had money, maybe you should spend some time trying to figure out how to make more money. Channel all of your pessimism into a bitter, rage-driven mission to find a better job.

Internet Junkie January 21, 2008 at 10:22 am

I like the “pretend you did not get a raise” tip: it is true that the more money I get, the more I tend to spend.
I am paying €30 a week for my daughter’s preschool; next year she will start school (free), so I will be able to put this €30 every week in my savings account!

emumIneft February 20, 2008 at 7:48 am

Just discovered a complete list of all marked down products at Amazon, sorted by category and % off, ranging from 50% off to 90% off (thanks Sonja for the effort).

Actually I never thought Amazon would have articles with 90% off, but only in the category Electronics there are more than 3000 of them – look for yourself.

Frugal Guy February 28, 2008 at 9:11 am

Great site for online coupons and deals: I find coupons for travel, computers, electronics, clothes – everything.

Make Friends, Earn Money March 29, 2008 at 7:58 am

I personally use the direct deposit approach to savings, because as you rightly point out it is a sure way to keep savings without being tempted to spend!

SSM October 21, 2008 at 4:04 pm

Making extra mortgage payments is a huge way to save money. You can also save a ton of money by doing a few little energy conservation things around the home such as basic home winterization. Plus using energy efficient lighting and appliances – all the extra money you save on your utility bill can be applied towards some of the great tips above!

KateFZ November 13, 2008 at 9:16 am

Over payments on the mortgage is a great way to save big bucks.
Need some extra cash to make the overpayment with?

Just follow a few of the suggestions here and you will have the extra cash you need to help you clear your mortgage fast.

Word of warning. Make overpayments on credit card debt first!! Then apply spare money to your mortgage.

Pascale November 18, 2008 at 10:44 am

Wonderful list! Keep up the good work!

Yogi November 28, 2008 at 3:01 am

About the rule #1: please take a look at the book “The richest man in Babylon”. I do not know if this idea comes from this book but regardless of that the rule is brilliantly simple and effective!
I smiled the whole time I read the book…

JGVFinance December 11, 2008 at 8:08 pm

This is truly an excellent post. I believe in all of them but thing stands out for me.

# 3 is the best way for me and i used myself and I teach my children to do the same. I openned another account and an investment account. It’s not big amounts but if you don’t touch it for more than a year you will be surprise. These two accounts are both automatic and taken off from my main account where my paycheck goes. So I will never see the money that was directly or automatically transfered to the two accounts.

To me this a force saving type that I always implement and tell my friends to do the same. It doesn’t have to be big amount but as long as ther is something that goes to that seperate account and do not have an access card for it.


JGVFinance December 11, 2008 at 8:16 pm

There is another way of saving that is very effective. One way to save forcefully is to take it off your pay right before you even see your paycheck. Simply put, salary deductions that would go straight to a savings bond account.

And I do not use my loose change but instead once I got home I have a jar where I just put those loose change and you will be surprise by thw end of the year how mcuh you can save. It may not be thousands but 800.00 to 900. is not bad.


Minneapolis Wedding Photographer January 24, 2009 at 8:42 pm

At a previous job, I had my paychecks automatically deposited into my checking account and a portion in to my savings account. My savings account is at a separate bank (credit union) with only a few locations. I just forgot about the extra money like I didn’t even have it and when I needed it and check my balance, there was twice as much as I thought! It was a great surprise!!!!

Jim D January 27, 2009 at 9:32 am

Each tip listed above is as valuable as the next.

#3 is a must for me. If your savings are automated you don’t even notice it, then when you need it your money is their waiting for you. Excellent


Jim D – Stock-Picking-Software

Mike February 5, 2009 at 9:12 pm

Love #4, that is really an excellent way to pay down debt once you’ve got your credit cards finished off. Great list!

Make Friends, Earn Money February 18, 2009 at 2:48 pm

personally your number 3 point is my favourite. If you can get out of the habit of handling money then you are more likely to save it rather than spend it.

Jett Brenner February 24, 2009 at 2:29 pm

“Pay Yourself First” is a huge concept! It changes the way you think. This change makes it possible to become a person who lives from paycheck to paycheck to a person with real wealth.

When I learned this concept, I stopped giving ALL of my paycheck to the landlord, the shops and the restaurants. When you pay yourself first (take 10% of you hard earned money and save it) you become the priority! Those other people cannot touch this money! It is now yours! It is amazing how fast it adds up as time goes on.

Jett Brenner February 24, 2009 at 2:52 pm

“Pay Yourself First” is a great mind trick. We tend to spend all of the money we have available. When you start to think that you must pay yourself, and that the money is gone once you pay, you begin saving instead of spending.

Another trick like this is to save your change. Try only buying things with 20 dollar bills. The change goes straight to the bank. Your mind learns that only 20s can be spent. You will still spend all of you 20s, but you will now have something left over.

Darin July 13, 2009 at 8:21 pm

Variable mortgage rates are quite low right now and a great way to save on interest and lower monthly mortgage payments.

L Castro September 27, 2010 at 7:43 pm

Hi Digerati Life,
Thanks for allowing me to comment. Indexed Universal Life Insurance as a savings vehicle is becoming less unconventional.

Computer Format November 14, 2011 at 3:31 am

“This is one of those classic savings approaches that we can easily employ. If we imagine ourselves as someone as important as any other creditor we have, then we can deploy payments to our own accounts on a regular basis just as we do our own bills.”

Nice man, i will try to do this. The thing with saving money is having the willpower to keep going after the first 3 months :(.

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