Instead of paying everyone else first and only saving what's left at the end of each month, pay yourself immediately after you receive your salary.
Basically, decide how much you want to save a month and transfer it to another bank account automatically each month after you receive your salary. Then you can happily spend what is left is your regular account, as you have already got the savings out of the way.
Balance is key, don't decide on an unsustainable amount, or you won't stick to it and don't have too low an amount, or you will end up saving less than what you currently do.
Basically, decide how much you want to save a month and transfer it to another bank account automatically each month after you receive your salary. Then you can happily spend what is left is your regular account, as you have already got the savings out of the way.
Balance is key, don't decide on an unsustainable amount, or you won't stick to it and don't have too low an amount, or you will end up saving less than what you currently do.
Why this works
"Out of sight, out of mind" as the saying goes. Set it up once and don't think about it.
When you feel like a frivolous expenditure, like a Starbucks grande cappuccino, and you see thousands of dollars in your regular bank account, you might feel like it's a drop in the ocean and go ahead. But if you see your regular account only has $500 left, and it's still a week to pay day, you might think twice.
My wife tried this a few years back. She had difficulty saving and usually lived pay cheque to pay cheque. She would manage to save up a few thousand, but once seeing this amount in her bank account, she would inevitably find something to spend it on and end up back in square one.
I helped her set it up and she started with a modest $500 a month. After a couple of years, I asked her how it was going and she said she had forgotten about the account. Imagine her shock when she logged into the new savings account and found over $10K in there, more money than she has ever had at any one time. Now, she has enough money to start investing and growing that money further.
When you feel like a frivolous expenditure, like a Starbucks grande cappuccino, and you see thousands of dollars in your regular bank account, you might feel like it's a drop in the ocean and go ahead. But if you see your regular account only has $500 left, and it's still a week to pay day, you might think twice.
My wife tried this a few years back. She had difficulty saving and usually lived pay cheque to pay cheque. She would manage to save up a few thousand, but once seeing this amount in her bank account, she would inevitably find something to spend it on and end up back in square one.
I helped her set it up and she started with a modest $500 a month. After a couple of years, I asked her how it was going and she said she had forgotten about the account. Imagine her shock when she logged into the new savings account and found over $10K in there, more money than she has ever had at any one time. Now, she has enough money to start investing and growing that money further.
How-to guide
- Decide how much money you would like to save a year. This amount should be more than what you have been able to save previously. But make sure to leave enough so you are not scrapping by every month.
- Setup a new bank account - pick an account that gives good interest from regular transfers. This guide from moneysmart.sg can help you decide. If it comes with an ATM card, destroy it when you receive it. The idea is to make it difficult for your future self to access this money and spend it.
- Create a standing transfer from your salary credit bank account to the new bank account.
As an example, assuming your current salary crediting account is in POSB, log into POSB internet banking and following the following steps.
First, click on "More Transfer Services" from the "Transfer" menu.
In the next screen, click on "Set Up Standing Instruction".
Complete the 2-factor authentication.
- Select the new bank account that you just created
- Fill in your name/description for your new bank account
- Select your existing salary crediting account
- Enter the amount of the monthly transfer
- Set the first payment date to the day after your next salary credit date
- Select "Monthly" payment frequency
- Leave the "Last Payment Date" and "Last Payment Amount" blank
- Select "Next"
On the next page, review your standing instruction details and hit submit once you are sure the details are correct.
That's it, you have setup the automatic transfer and are on your way to consistent regular savings!
That's it, you have setup the automatic transfer and are on your way to consistent regular savings!