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Savings Tricks

February 4, 2009

Generally I don’t believe in little “tricks” to help you save.  I don’t save my loose change, or put a dollar away every day, or save every $5 bill I get.  I don’t sneak money unbudgeted out of my checking into savings.

But I do a couple of the biggest, most powerful “tricks” of all.  The first trick is the “extra paycheck” trick.  I’ve heard (very few) people advocate that you should figure those extra paychecks into each monthly budget throughout the year.  That doesn’t work for me.   You get used to seeing things go up by whatever amount it is you usually save.  Then, an “extra paycheck” comes around.  It is feels SO nice to have a sudden windfall that boosts you towards your goals!  This also means that each monthly budget I create is based on 92% (12/13) of income.  Not a big deal, but it is an automatic way to save, and about every six months, you get a nice boost.

The second trick is the tax refund trick. I don’t care what any experts say, I’m disappointed if my refund isn’t at least $1000.  What, I missed out on $20-$30 in interest in 2008?  Big deal.  After the usual December/January spending, it feels great to get a boost to my savings.

These tricks are going to make my savings accounts happy for the next couple months!

PS – I revived my savings progress bars and updated them for my 2009 goals.

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16 Comments leave one →
  1. February 4, 2009 6:51 pm

    i like getting a tax refund, too. getting a big chunk of money is an easy way for me to attack a debt full force, or put a solid amount of money into a savings account. i guess i’m the kind of person who finds it easier to process $1,000 at once better than 10 installments of $100. the interest to me is nominal; ultimately i’d spend the extra money every month if i filed extra exemptions on my taxes, so getting the refund back and claiming no exemptions actually helps me a whole lot working towards my goals.

  2. February 4, 2009 8:27 pm

    Ditto on the tax refund. Just like they advocate paying off your lowest balances first as opposed to highest interest for the morale boost, I think getting a nice hunk of change after taxes does more for my mood than getting back $10 extra each paycheck (or whatever that’d come out to).

  3. February 5, 2009 12:06 am

    We get paid bi-monthly and We make too much to receive tax refund 😦 do you have any other tricks? 🙂

  4. February 5, 2009 6:54 am

    We found out this year that we’re way over paying! Our refund will be over $3000! I guess we just left our W4’s at the same levels they were before we had kids. Now the kiddos provide a nice return every year.

    So, I think something closer to $1000 is a better way to go. We plan on adjusting our W4’s to bring our refund down a bit next year.

  5. February 5, 2009 7:29 am

    Yep, I get paid bi-weekly and base my budget on 2 paychecks a month. That means two extra paychecks a year I use to boost savings, pay off debt, and one helps with christmas. I think it’s a simpler way to budget, otherwise you need to keep 5/6 of that extra paycheck in your account the first month, 4/6 the next and so on. May is the next three paycheck month this year, I can’t wait.

  6. February 5, 2009 10:53 am

    This has to be the first year I’m not expecting a refund, either federal or CA, and that’s kind of cool since I’ve had the money to pay stashed away, but I won’t deny there’s something awfully nice and ice-creamy about getting a “windfall.”

    I don’t budget the extra check either, except in my savings plans.

  7. February 5, 2009 12:43 pm

    I love getting a big refund, and I think I’d be disappointed if I did my taxes and wasn’t getting at least something back.

    Extra paycheck months are my favorite.

    These are the kinds of tricks I can totally get on board with! Everything else (like the ones you’ve mentioned above) seems silly to me, but maybe I’m just beyond it.

  8. February 5, 2009 1:20 pm

    I split the difference on the tax refund. I lowered my withholding to eliminate my federal tax refund, BUT I direct deposit the difference each week into a separate “Tax Refund Account” via ING.

    Once I file my taxes, that money (plus ~2.5% interest) is MINE, baby, MINE. No waiting for my refund, no “wasting” interest, and I still get a lump sum at the beginning of the year! 😉

    (Plus, of course, the year that I do underestimate my taxes, I won’t have to pay out of pocket!)

  9. Stacey permalink
    February 5, 2009 1:43 pm

    Aren’t bi-weekly paychecks great?

    My husband gets paid every other week, but I get paid once a month. We’ve got this weird 4-week/2-week budget going on… but when we come into “extra” paycheck period, it goes towards debt.

    It feels GREAT to put his entire paycheck towards the mortgage. We’ll be using what’s left of our tax refund to pay down debt too, after we remodel the bathroom. Isn’t it funny how “found” money gets spent differently than regular paycheck funds?

  10. February 5, 2009 5:59 pm

    just to be clear on the extra paycheck thing…

    you budget as you usually would, but you make your money available for spending 12/13th’s of what it actually is. that way, without knowing it, you’re accruing an extra paycheck every year because you’re not spending it? do you guys put the 8% away in a separate account so you can’t see it every month?

    i’ve got some discipline but if the money was in my checking account staring me in the face i don’t know how long it would stay there, haha. but it does sound like a really good idea.

  11. February 5, 2009 6:35 pm

    @zach – I should have provided a link or better explanation. I am paid bi-weekly, so in general, months have 2 paychecks. But there are 2 months a year that will have three, due to the fact that there are 52 weeks in a year, not 48.

    The trick doesn’t work if you are paid monthly or bi-monthly.

  12. February 5, 2009 6:44 pm

    ahhhh, okay. i gotcha. yeah, i’m paid monthly.

    although… if i could budget 12 months of living over 11 months of salary, then my december paycheck could, in theory, go straight to savings at the end of the year, and i’d only have to cut down my spending less than 10% (8.33% exactly) each month. that seems pretty manageable. all i’d have to do is transfer 8.33% of my monthly salary into a savings account each month, and then in november withdraw from it for living expenses in december. i guess i could even use it for christmas gifts if i really wanted to, as well. and all that time i’d be accruing interest on it.

    hmmmmmmm. i totally might do this…

  13. Andrew Stevens permalink
    February 5, 2009 9:52 pm

    I’m one of those people who hates getting a refund. E.g. I paid $4500 to federal and state authorities in 2008, even though I knew the taxes were coming. (I was safe from penalty and interest under “prior year safe harbor” rules.) It turns out that I just back-of-the-enveloped my taxes for this year and, because I paid so much to the Feds last year, I am owed a refund on my state taxes (which allows deductions for money paid in taxes to the federal government). Not much, just a few hundred dollars and I’ll be paying twice that to the Feds in April.

    You’re right that with current interest rates, the amount of money earned in interest is fairly trivial. I admit that I probably play unnecessary games to maximize my interest income for amounts that don’t matter in the long run.

    But then the psychological argument for a refund doesn’t work for me. I don’t treat “found” money any differently from normal paychecks and getting a big refund irritates me since I’d rather have had the money in my bank account all along.

    I do, however, like three paycheck months as much as anybody else who gets paid biweekly. It’s a paycheck with no monthly bill claims on it like regular paychecks have. So I get the same satisfaction from depositing it all in the bank as anyone else. Actually, since I pay for everything by credit card and then pay it off every month, it’s really when I get three paychecks in between credit card payments that’s really nice. But it’s the three paycheck months which give the largest boost to my monthly net worth calculations.

  14. ldub permalink
    February 26, 2009 8:46 am

    i posted on gai shan life, but my savings “hack” is my grandma’s method of rounding every checking account transaction to the next $1 or $5. it makes my math easier and then there’s always a cushion in my checking account. roughly quarterly i reconcile the actual numbers and sweep the “cushion” money either into an extra debt payment or just into my savings account. spare security, easier math, and a snowball, all in one!

  15. March 11, 2009 2:39 pm

    I’m also going against the crowd. I don’t like tax refunds, and I budget my extra paycheck right into my monthly budgets. Of course, I then do the same thing most of you do and send it straight to debt repayment or savings. 🙂

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