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They say it’s not want you make but what you keep. Sometimes the most difficult financial challenge is figuring out where to keep your money so you don’t spend it.
Throughout the last 10 years, I’ve come up with creative ways to hide money from myself and my family so we live well below our means. The money saved now totals more than $100,000. Once you start applying these tricks for stashing cash, you will not even miss the money:
Automatic payroll deductions
I started taking advantage of the automatic payroll deductions for the 401K plan at my workplace immediately after being hired. I increased the amount I contributed to the 401K based on increases in my income. With this technique, I’ve saved 5 to 15 percent of my salary in the past 10 years, depending on our budget each year.
Don’t accept a pay raise
Of course, I accept pay raises from my employer, but I don’t allow myself to receive a pay raise. I always save any additional pay increases given through the years into the 401K or as tax payments to the IRS. I’m still living on the same salary I made 10 years ago. With this technique, I’ve saved an extra 2 to 5 percent of my salary each year except for years when pay increases were frozen.
Keep the bare minimum in the checking account
A nice mental trick that keeps me living below my means is to keep only the bare minimum needed for necessities in my checking account. I allow the bank to transfer money from checking to a savings account every month. The savings account serves as an emergency fund. When I see my checking account balance, I feel as though I need to be prudent about my purchases because I don’t see any “extra” money. With this technique I’ve saved about 2 to 5 percent of the money that goes into my checking account each month.
Open a Roth IRA account
I love the Roth IRA retirement account because it allows a person to take money out in retirement without paying any taxes on the gains. Even thought the account is flexible, and I could make qualified withdrawals without penalty, I’m too motivated by this long-term bonus. I opened a Roth IRA with a discount brokerage firm that allows me to make automatic deductions out of my checking account on a regular basis. I consider it just another “bill.” Since it’s a separate account, the Roth IRA is off limits for daily spending. With this technique, I’ve saved between $1,000 and $5,000 a year, depending on what I could afford.
Save actual cash
It may sound completely retro, but I actually save real cash for certain purposes. I don’t hide it under the mattress! Some financial experts use the “envelope system” to train people in debt to live on cash. I thing there is something eye-opening about taking real hard cash and dividing it in envelopes for purposes such as “car repairs,” “hair/nails/massages” and “eating out.” I find it more difficult to take cash to go get a massage, although swiping a credit card seems painless. With this technique, I’ve saved hundreds of dollars so I don’t have to use a credit card or dip into savings for car repairs, eating out and hair/nails.
Save money for the ones you love
Whether it’s your spouse or your children, save money for and with members of your immediate family. I helped my children open savings, checking and trading account with a discount brokerage firm at an early age under the uniform gift for minor account. Even if your spouse is not working, you may be eligible, depending on income guidelines, to open a Roth IRA for your spouse. When the goal is to hide money so you don’t spend it, having accounts designated for other loved ones definitely motivates you not to touch the funds! With this strategy, I’ve saved $1,000 to $5,000 a year for my husband’s Roth IRA. I no longer give my children money since they are teenagers, but they save what they earn.
With a combination of old fashioned “cash under the mattress” and modern online banking and individual investment accounts, I’m able to save more money than ever. And the best part is I don’t feel deprived. And my children feel secure knowing they have a solid financial foundation for their futures.
More from this contributor:
Five Money Cliches Reinvented
Using Roth IRA as an Emergency Fund
Easy Guide To DRIPS