TIP: Treat Savings as a Bill

You might have heard of this one before, but it’s one of my favorites because it’s such an easy way to think and plan ahead. Especially since people usually pay attention to this AFTER they’ve done all their bill paying – as if it’s the least important??

Some may call this “paying you first,” but I never fully understood what that meant. So I just think of it as paying another bill – the bill towards the “future me!” :) And you just pay it like you would any other bill you’ve got that month.

Sometimes it’s only $20/mo when you first start out, and others it’s hundreds, or even *thousands* when you get to be big pimpin’. But the point is, the more you make it a habit, the more you’ll end up with down the road, and the more you won’t “forget” to do it too. I.E. Spend what’s left after all your other bills, even though you tell yourself everything “extra” goes right to savings – hah! (I used to do that all the time. Or, play the “transfer game” – shuffling money from savings to checking at the end of every month cuz I sucked at budgeting ;))

And you need to stay on top of this bill too, just like any others. If you’re late – you’ve gotta pay the penalty! Maybe that means xfering an extra $5.00 over to make up for it or something. Just in this case it’s still all going back to YOU vs a company like all your other bills going on… And brownie points for automating it too, if that helps you not forget (just like the rest of the bills).

Now, *where* you pay this money into is totally up to you and whatever goals you’re working towards. You could pay it into your…

  • Savings account
  • Money market account
  • 401(k)
  • IRA
  • Brokerage account
  • Or any other place that you deem wise

And the amounts to be thrown in there will differ just the same:

  • Maybe you can only put in $20/mo?
  • Maybe it’s a percentage, like 10% of all your income? (Sexy!)
  • Orrrr, maybe you’ve watched that Oprah episode and you want to save 50%! (Sexier!)

Only you know the answers to all that, but it only really matters if you ACT on it. Thinking and strategizing only gets you so far – you have to pull the trigger and get it moving or it’s just a waste of time! And your future-you will hate you for it too. (Anyone remember that How I Met Your Mother episode where  they’d always let their “future selves” deal with any big decisions and get back to playing video games? Haha… I ALWAYS think of that now anytime I push something aside :) I’ll let Future J. Money deal with that!)

I also remember the very first time I started putting money into my 401(k) too. Mainly because I was a big fat dummy and the entire time (a year) I thought I was contributing to it, it turned out I WASN’T. It was back in 2002 – the time I moved to NYC with a wad of cash and 2 suitcases – and my dad kept harping on me saying I needed to sign up ‘cuz it was “the smartest thing you can do at your age.” (And of course he was right – where else can you double your money guaranteed like that??)

So to get him off my back I told him I did it, fully-intending to do so the next day. Only, a) I forgot (saving was NOT on my priority list at 22 living partying in one of the best cities in the world ;)), and b) I started believing my own lies because the entire time I thought I HAD been saving! I just never checked until my dad asked me about it one day to prove his point even more how important savings is by looking at all the compounding going on. I asked him where I could find that number, and he told me to look on my check.

It wasn’t there.

So I stroll into HR thinking there must have been a glitch or something, and I literally ask them if there’s a problem going on with their system. “Yeah, there’s a problem. You never signed up!” “Ummmm…. what?” “We have no record of you signing up, sir. But you can now if you’d like?” “Ummm…. yes?” Haha…

Needless to say my father wasn’t very thrilled ;) But at least I’ve been investing ever since!! That’s like, what, 12 years now! And while I can no longer put anything into a 401k and get my free matches (*tear*) I still annually max out my SEP Ira which us elf-employed peeps have. Still pretty embarrassing though…

Anyways, all that to say action is the most important. So figure out a system that works best for you (automating, “paying it as a bill,” whatever), and get the ball rolling now so you don’t feel like a huge idiot later. As awesome as it would be, we don’t  have anyone to check up on us unfortunately now that we’re “responsible adults.Don’t leave it in the hands of the future-you!

PS: To check out the writings of the past-me, here’s a similar article I wrote back in 2008: Saving 10% of your money is like paying an extra bill. It seemed I wasn’t much a fan of grammar back then ;)

[Photo cred: pheezy]

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  1. a terrible husband... January 29, 2014 at 6:28 AM

    We treat savings like an IRS debt. It comes first. And just the tought of not paying it makes us VERY uncomfortable.

    1. J. Money January 29, 2014 at 9:22 PM

      Haha, love it.

  2. Jon @ MoneySmartGuides January 29, 2014 at 7:57 AM

    It’s so important to pay yourself first. I find that I never do get around to saving whatever is left at month end, in fact, I usually wouldn’t have anything to save anyways. By having automatic transfers, I don’t even think about saving money. When I randomly check my savings account, I’m blown away at how much I saved.

  3. Dave @ The New York Budget January 29, 2014 at 8:15 AM

    Woops! Well, at least you signed up for the 401(k) eventually. What’s that saying, “the best time to plant a tree was 20 years ago. The second best time is today.”

    I also think that my HR department thinks I am weird. I am always chatting with them about my benefits. I don’t think many of my coworkers ask nearly as many questions.

    1. J. Money January 29, 2014 at 9:24 PM

      “The best time to plant a tree was 20 years ago. The second best time is today.”

      Yes! I’m so tweeting that right now… (and yes, I’m a 16 y/o girl…)

  4. Mark Ross @moneysavingdude January 29, 2014 at 8:37 AM

    Nice tip J! I always aim to save at least $100 per month out of my allowance and put it on my savings account for the time being. I’m planning to invest all of my saved money this coming May by the way.

    1. J. Money January 29, 2014 at 9:25 PM

      Cool – what are you going to invest it in?

  5. Amanda @ Passionately Simple Life January 29, 2014 at 8:51 AM

    It’s great when I don’t have to think about savings, I just do it! It really makes me forget that the money is there and I don’t touch it. I feel like I’m living a great life on the half that I put into checking. After that’s gone, it’s gone. The best part for me is being able to physically see my money (because most of it is tips from serving shifts) that I split it right down the middle and save half. There’s no if’s and’s or but’s.

    1. J. Money January 29, 2014 at 9:25 PM

      Wait, so are you stashing away 50% of all your income?? That is amazing!

  6. EL @ MoneyWatch101 January 29, 2014 at 8:57 AM

    I agree J. if you start young working that savings bug, it will get easier as you age. Then you will increase the savings once you see the balance growing, thats how motivation works. They say the first 100K is the hardest. What do you say J. since you have 4 times that amount?

    1. J. Money January 29, 2014 at 9:27 PM

      I say the first $15,000 is the hardest. Once I hit that amount it was ON, brotha!

  7. Brian@ Debt Discipline January 29, 2014 at 9:06 AM

    This is one of the biggest things I’m looking forward to once we are done with our debt snowball, to really be able to increase our saving/emergency fund.

    1. J. Money January 29, 2014 at 9:28 PM

      Especially if you roll that snowball right into your savings account every month!

  8. Gene Roberts January 29, 2014 at 9:07 AM

    Automatic contributions to my 401k are the best thing since sliced bread!

    I calculated all the contributions to 401k, HSA, and profit sharing my company does and as a percentage of my gross pay for the year it came to 28.2%!

    Damn, but future me is one greedy SOB. :)

    1. J. Money January 29, 2014 at 9:29 PM

      Yeah he is! Haha… but a *smart* SOB at least ;)

  9. John S @ Frugal Rules January 29, 2014 at 9:14 AM

    I love looking at saving this way as it’s totally paying a bill towards your future self. We’ve been doing it for several years and putting it towards savings, retirement, etc and fell off the bus on the retirement front last year with it being my first full year of self-employment. That is no longer though as we got the automatic transfers set up in both our Roths and SEPs!

  10. Liz January 29, 2014 at 9:46 AM

    It’s all about paying yourself first. The 5th of every month I have an automatic transfer that transfers a fixed amount to our savings. Don’t even have to think about it. It’s critical to us building our financial nest egg.

  11. Becky @ RunFunDone January 29, 2014 at 9:48 AM

    I pay myself and charities first…but then get annoyed because the money isn’t immediately transferred! My savings is with Capital One 360 (formerly ING), so it takes a few days for it to move from my checking account to my savings account. I want immediate gratification! I want to see the money in my savings account right away! :)

    1. J. Money January 29, 2014 at 9:30 PM

      Lame!! I agree – that sucker needs to be instant… Good for you on including charities too. That’s one area I need to get better about again.

  12. Shannon @ Financially Blonde January 29, 2014 at 9:52 AM

    I agree with you, I never understood the “pay yourself first” saying, but I definitely treat savings as an “expense” in my budget, and it’s the first line item. Once you have that taken care of, the rest of the budgeting process is “easy.”

  13. Kathy January 29, 2014 at 11:18 AM

    When my son got his job after graduating with a master’s degree, the first thing we did with him is sit at the computer to help him sign up for all the employee benefits his company offered. We especially made sure that he signed up immediately for the retirement plan and he started out putting in about 17% of his salary. I think in later years, he adjusted that just a little so he would have money for a house down payment but he has been in the retirement plan from day one. We are not helicopter parents but that was the one thing we demanded he do.

    1. J. Money January 29, 2014 at 9:32 PM

      You guys need to win an award for that :) VERY very smart getting that 401k going *before* he notices the difference every two weeks. Once you’re used to living below your income it’s smooth sailing!

  14. Joe January 29, 2014 at 12:31 PM

    My dad convinced me to start saving right away and I’m really grateful for that. I have been saving ever since and it’s a habit now. If I didn’t start saving right away, I’d probably spend a lot more money on discretionary items every day.

  15. Cat Alford (@BudgetBlonde) January 29, 2014 at 12:49 PM

    Ha love this. I think we’ve allll made mistakes and had to tell the parental units they were right. ;) I like that my IRA payment comes out automatically but I definitely wish I could save more than just that. Werkin’ on it!

    1. J. Money January 29, 2014 at 9:32 PM

      (while you’re twerkin’ on it?)

  16. Crystal January 29, 2014 at 1:48 PM

    We don’t do this as much as we used to, but $500 does get moved into a new-to-us car fund every month just like a bill. The rest of our savings and investment money comes from the monthly extra. But yes, saving at least something every month for future you is super important.

  17. Done by Forty January 29, 2014 at 2:00 PM

    At least you caught that glitch after just the first year. Imagine that error hanging around for a decade!

    Agree on the importance of action. With the propensity of PF folks to big big planners, I think we often gloss over the execution bit.

    1. J. Money January 29, 2014 at 9:33 PM

      Agreed. There are the do’ers, the thinkers, and then the in-between’ers. I try to be in that latter group, but Lord knows we get stuck in the others from time to time.

  18. Ryan @ Impersonal Fiannce January 29, 2014 at 2:44 PM

    True that. I dig this idea. I totally regret not enrolling in automatic transfers to my savings and investment accounts sooner, because ever since I did it’s been just like a bill I pay every week. Total bummer about that missed year in the 401(k), but at least it was only a year, and you seem to have figured some things out!

    1. J. Money January 29, 2014 at 9:35 PM

      I guess we owe my entire success, and this blog itself even, to my dad. If it wasn’t for my 401(k) building up over the years and really motivating me to keep going, who knows where I’d be? Or who you’d be talking to right now in this discussion :)

  19. Grayson @ Debt Roundup January 29, 2014 at 3:54 PM

    Dang it, you stole my method. I have always treated my savings like a monthly bill. I never really paid myself first, only once a month. How dare you share my sweet ass method and give away my best secrets!

    I had something similar happen with my 401k. Though I did sign up, the processing company didn’t put the right percentage. Lost quite a bit that first year until I got my yearly statement.

    1. J. Money January 29, 2014 at 9:35 PM

      I should probably stop stalking you, eh?

  20. Martin January 29, 2014 at 6:21 PM

    Do whatever it takes to put your money away! Any excuse. You worked for it. Save some of it!

  21. Karen @ Money Saving Enthusiast January 29, 2014 at 7:31 PM

    I like how you say to treat it as a bill. That’s how I think of my kids. . .walking, talking bills. JK It really takes the stress out of it though. Many ppl talk about debt that way. It’s obviously better to pay it down faster but you can’t get SO stressed. ; )

    1. J. Money January 29, 2014 at 9:35 PM


  22. Heather January 29, 2014 at 8:12 PM

    Totally agree! And just like the rest of my bills, I set up auto-pay! A portion of every paycheck automatically transfers into savings so I’m never late on this bill. After awhile I even sort of forgot it was happening and got used to the smaller paycheck while my savings continues to rise!