Dipping into your savings account constantly can be a sign that you’re letting FOMO control your spending habits.
We’ve all been there. One week you’re patting yourself on the back for growing your savings. And the next week you’re trying to transfer money back to your checking before you get socked with an overdraft fee.
No need to beat yourself up over the past. But, if you want to change your money habits for the better, here are some tips to grow your savings.
Have a Separate Emergency Fund
Create a separate account devoted only to real emergencies. By real emergencies, I mean paying for a new engine for your car so you can get to work.
If you don’t have an emergency fund yet, make this your main money goal and build it up to at least $1,000. The longer you go without an emergency fund, the longer you’ll keep dipping into your primary savings account to pay for these expenses. Worse yet, you can go into credit card debt.
Identify the Trigger
Why do you keep dipping into your savings? Are you overspending when it comes to eating out? Or, maybe you forgot to save up for larger expenses like your car registration.
Identify what is causing you to spend and this way you can learn how to fix it.
For flexible spending categories, it can be easier to stick to a tight number if you limit yourself to cash. For example, say you are going out to lunch and Target with a friend. If you know you may overspend, take the exact amount of cash budgeted and leave your bank card at home. You’ll think twice before ordering an extra drink or buying that cute shirt.
Out of Sight, Out of Mind
When I wanted to stop taking cash out of my savings account, I opened up a new account at a different bank and set up automatic bi-monthly deposits. Since it was not my main bank, I grew my savings account as I was less tempted to withdraw money from another bank.
Get a New Mindset
When you buy a seven dollar burrito, you don’t ask for your money back a week later because your account is a tad short. When you made that purchase, you counted that money as gone forever.
You need to adopt a similar mindset with your savings.
So, deposit money into your savings account and consider it gone forever. This means that when you are $50 short before payday, you may have to curb your spending.
Another powerful mindset tool is to give your savings account a purpose. There is no fun in saving for a vague someday. Take time to think about why you want to save money and how much money you need to save.
For example, if you want to save $20,000 for a down payment for a house, this gives you something to really save up for. Every time you deposit $200, you’ve hit one percent of your goal. You’ll be less tempted to take money away from this goal, too. Just think: transferring $50 from this savings account to your checking account means you’re slipping further away from your home ownership dream.
Set Up Rewards or Punishments
Are you motivated by the thought of getting a reward? Do you want to avoid punishment? Knowing which one of these is a greater motivator can help you break the habit of dipping into your savings.
If rewards motivate you, for example, set up two to three savings goals and rewards. For instance, if you save $4,000, perhaps your reward is to buy a new gaming system guilt-free.
If fear of punishment motivates you, recruit your friends or family members to help. What embarrassing thing will you have to do if you don’t keep your savings account balance in check? Perhaps the thought of wearing a loud, outdated suit from your dad’s closet to work will be just the thing to keep you saving faithfully.
Let Your Bank Account Do the Work for You
Use the power of automation to make saving painless. The point is: When you don’t have to think about saving money, it’s easier to save.
So, consider automatically depositing money from your paycheck into your savings account – on the day it hits your account. Chime members can opt for a percentage of each paycheck to go into their savings.
Another way Chime helps streamline your savings is with the Chime Visa® debit card. Just use your debit card to spend as you usually do, and Chime will round up the transaction to the nearest dollar. The difference is then transferred to your Savings Account.
Max Out Your Transfer Allowance
The Federal Reserve Board sets a limit of six transactions per month on certain transfers and withdrawals from your savings account. The reason? To encourage you to use your savings to actually save money – and not spend it.
Some Chime members use this rule to their advantage to cut out the temptation to dip into their savings. How? They initiate six one-cent transfers at the beginning of the month from their Savings Account to their Spending Account. After the six transfers, they can only transfer money to their savings, but they cannot withdraw it.
Every savings account has this same rule, so you can use this hack at any bank. However, it’s important for you to understand your bank’s rules to ensure you don’t get dinged with unnecessary fees if you try to make a seventh withdrawal for the month. Along these lines, Chime will never charge you fees, so you may want to consider switching to a bank that will actually help you get ahead financially.
You Can Do It
Breaking bad money habits takes time and effort.
But, as you can see, there are many ways you can develop healthy money habits to save more money. Why not start right now by setting yourself up to get paid early?