This is post #13 from the 30 Day Personal Finance Challenge: Boost Your Financial Health with a Daily Tip!

Here is a quick and easy trick you can apply straight away:

Before you pay your bills, before you buy groceries, before you do anything else, set aside a portion of your income to save. The first bill you pay each month should be to yourself.

It’s as simple as that!

What are the benefits?

• You will get used to living with less. You won’t be tempted to buy stuff, simply because you see all this ‘free’ in your checking account waiting to be spent.
• Time passes unnoticeably, and before you know it you will have nice little savings amount (or quite a big one?!)
• It is automatic, so you don’t need to exercise your willpower. We all know it’s tempting to choose between the nice purchase now and something bigger but intangible in future. It doesn’t require you to do anything than the initial setup and of course making sure there’s enough money to draw from.
• You will avoid the trap of your expenses expanding together with your income.

How to set it up?

1. Create an account that is separate from all your other accounts.
2. Decide how much you want to go with. You get extra points if you go beyond your comfort zone. Say you estimate you would be able to save 10% of your income, then set the transfer to 15%. Let’s see if you make it!
3. Set up a monthly transfer which is executed as soon you get your paycheck.
4. Forget about this money. Go out and enjoy your life.

Tips to make this really work for you:

• If you haven’t built your emergency fund, get started with it.
• If you have some high-interest credits, focus on paying them first. You should still set a saving transfer, even if it’s a very small amount.
• Don’t get a credit/debit card associated with this account.
• If you get a promotion or salary increase, immediately increase your savings amount. Before you get used to the newly expanded income, pretend the promotion never happened. Only your growing saving account would know.
• Some people believe that you should pay yourself first no matter what, (even if you fail to meet external financial obligations) and others believe there’s a point at which you should pay others first. Where you draw the line is up to you.
• Even if you think you are at your absolute limit, and you need every single cent of your income to cover your life expenses, start with something small. See how it grows with time.
• Before a big trip save in advance so it doesn’t hit you all at once. For six months before I went on a road trip in California, I was transferring €500 monthly to a special Road-Trip account. I wouldn’t say it went unnoticed on my budget, but it got distributed in time. All this time I had the awareness I should not go bananas with my spending because €500 every month were already dedicated to the trip saving goal.

Happy saving! Upwards and onwards!